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/ 

COMMITTEE ON INTERSTATE AND FOREIGN COMMERCE, 
HOUSE OF REPRESENTATIVES. 


SPECIAL COMMITTEE 


on 3 3 2 — 

3-7/ 

THE INVESTIGATION OF THE 
PANAMA RAILWAA^ 
COMPANY. 


Hon. DORSEY W. SHACKLEFORD, Chairman. 
Hon. WILLIAM C. LOVERING. 

Hon. CHARLES E. TOWNSEND. 

Hon. JOHN J. ESCH. 

Hon. WILLIAM C. ADAMSON. 


FEBRUARY, 1905. 


WASHINGTON: 

GOVERNMENT PRINTING OFFICE. 
1905 . 

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INVESTIGATION OF PANAMA RAILWAY COMPANY. 


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4 

24 State Street, 

New York City , February 13,1905. 

Present, Hon. D. W. Shackleford (chairman), Hon. Wm. C. Lov¬ 
er 111 ^ Hon. John J. Esch, Hon. Charles E. Townsend, and Hon. Wil¬ 
liam C. Adamson, committee. 

Also, Mr. J. Edward Simmons, president; Edward A. Drake, vice 
president and secretaiy; William Nelson Cronrwell, general counsel; 
Sylvester Deming, treasurer; and Vernon H. Brown, director; of the 
Panama Railroad Company. 

Meeting called to order at 10.35 a, m. 

The Chairman (Mr. Shackleford). I will ask Mr. Simmons, Mr. 
Cromwell, and Mr. Drake, who are present, to appear as witnesses, 
and they will be sworn. 

^ Mr. J. Edward Simmons, Mr. Edward A. Drake, and Mr. William 
Nelson Cromwell were then sworn by the chairman. 

Mr. Esch. I would suggest, Mr. Chairman, that the resolution of 
the House of Representatives providing for this hearing be intro¬ 
duced here. 

The Chairman. That may be done; the resolution may be inserted 
and marked Exhibit 1. 


Exhibit No. 1. 

[House of Representatives, Resolution No. 384, Fifty-eighth Congress, third session. 

Report No. 3474.] 

Mr. Shackleford submitted the following resolution: 

Whereas the United States is now the owner of more than ninety-eight per 
centum of the shares of the capital stock of the Panama Railway Company and 
it is for that reason expedient that Congress should have full knowledge of the 
affairs of said company: Therefore, be it 

Resolved , That the Committee on Interstate and Foreign Commerce be, and 
is hereby, directed to investigate the operation, management, and condition of 
said railway company and all franchises and property belonging thereto, includ¬ 
ing steamships owned, operated, or controlled by it, or under any contract or 
agreement of any kind or character with it; that such committee make such 
investigations and report the testimony with their conclusions thereon as soon 
as possible, and that said committee or any duly appointed subcommittee thereof 
shall have power to examine any or all records, books, documents, accounts, and 
vouchers of said company, or of any officer or agent thereof or of any person, 
company, or corporation which may have had any agreements or relations with 
said railway company, and all records and minutes of the acts and proceedings 
of any meeting of the stockholders or directors of said railway company, and 
shall have power to administer oaths, to employ or have the services of a stenog¬ 
rapher, clerk, accountant, and messenger, and incur such other expenses as 
may be deemed necessary; that the meetings of said committee or subcommittee 
be held in the Capitol building at the city of Washington and in such other 
places as said committee or subcommittee shall determine, and the necessary 
expenses shall be paid out of the contingent fund of the House on the usual 
vouchers. 


3 



4 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


The Chairman. Mr. Simmons, I believe you are the president of 
the board of directors ? 

Mr. Simmons. Yes; 1 am president of the company. 

The Chairman. Will you provide us with the annual report of the 
board of directors for 1902, and immediate preceding years ? 

Mr. Simmons. Yes; I hand you copies of the annual report of the 
years 1893 to 1903, inclusive. 

The Chairman. Mr. Townsend, you may examine Mr. Simmons 
with reference to the reports first. 

Mr. Townsend. I will ask you, Mr. Simmons, what is your full 
name and your connection with this company ? 

Mr. Simmons. My name is Joseph Edward Simmons, and I am 
president of the Panama Railway Company. 

Mr. Townsend. How long have you occupied that position ? 

Mr. Simmons. I was elected in 1895. 

Mr. Townsend. Had you been connected with the railroad as stock¬ 
holder or director prior to that time ? 

Mr. Simmons. I had. 

Mr. Townsend. For how long ? 

Mr. Simmons. Several years. 

Mr. Townsend. Can you tell when you first became associated with 
this railroad in an official capacity ? 

Mr. Simmons. I can not; the records will show. 

Mr. Drake. About 1889. 

Mr. Simmons. About 1889; yes. 

Mr. Townsend. You had been a stockholder prior to that? 

Mr. Simmons. No; I had not been a stockholder prior to that. 

Mr. Townsend. But you became director at the time you became a 
stockholder ? 

Mr. Simmons. Yes. 

Mr. Townsend. What was this corporation originally capitalized 
for? 

Mr. Simmons. I think the original incorporation was $7,000,000. 

Mr. Townsend. Your offices are in the city of New York? 

Mr. Simmons. They are. 

Mr. Townsend. For how long have they been here? 

Mr. Simmons. Ever since I have been connected with the company. 

Mr. Townsend. You keep all of your records in this office? 

Mr. Simmons. About all the records, excepting such records as are 
necessarily kept at the Isthmus. 

Mr. Townsend. What records are those? 

Mr. Simmons. Relating to the office of the superintendent. 

Mr. Townsend. Does he make reports to the office here ? 

Mr. Simmons. He does. 

Mr. Townsend. How often? 

Mr. Simmons. Whenever we call for them. 

Mr. Townsend. There is no stated period for him ? 

Mr. Drake. The mail arrives every Tuesday, bringing the opera¬ 
tions up to date. 

Mr. Townsend. Filed and adopted. 

Mr. Simmons. Oh, yes; they are adopted. 

Mr. Drake. The reports of accounts are made up monthly, quar¬ 
terly, semiannually, and annually. The annual reports are compiled 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 5 

from those.. We are constantly in communication with the Isthmus 
by every Tuesday’s arrival. 

Mr. Townsend. So that practically your complete record is here in 
the office, with the exception of the report of a few weeks back ? 

Mr. Drake. Yes, sir; for fifty years back they have been preserved 
and are in a fireproof apartment of this office. 

Mr. Townsend. Please say who constitute your present board of 
directors. 

Mr. Cromwell. I will read the names of the present board of 
directors: Edward A. Drake, J. Edward Simmons, Samuel M. Fel¬ 
ton, J. H. Parker, William Nelson Cromwell, Vernon H. Brown, 
John D. Walker, William H. Burr, C. Ewald Grunsky, William 
Barclay Parsons, G. W. Davis, B. M. Harrod. 

Mr. Townsend. When were those gentlemen elected directors? 

Mr. Simmons. The records will tell. 

Mr. Townsend. Were they elected at your regular annual meeting? 

Mr. Simmons. Yes; every year we elect our board of thirteen 
directors. 

Mr. Townsend. When? 

Mr. Cromwell. In April of each year. The following-named mem¬ 
bers were elected at the last annual meeting, April, 1904, to wit: 
Edward A. Drake, J. Edward Simmons. Samuel M, Felton, J. H. 
Parker, William Nelson Cromwell, and Vernon H. Brown. During 
the year, by resignations of those who formerly occupied the places, 
there have been elected Messrs. Walker, Burr, Grunsky, Parsons, 
Davis, Harrod, and Ilecker. The latter has resigned. 

Mr. Simmons. We elect a board of directors every year, and when¬ 
ever a vacancy occurs we fill it. 

Mr. Cromwell. If you would like to know when the election of the 
new members occurred during the year, we show that. 

Mr. Townsend. Mr. Simmons, your board of directors elected you 
president immediately after the election of the directors ? 

Mr. Simmons. I think I was elected president, soon after the death 
of Gen. John Newton, by the board of directors. He died in office, 
and I was elected to succeed him. After the board of directors were 
elected they then elected me president in May, 1895. 

Mr. Townsend. Have you devoted your entire time to the business 
of the company since you were made president? 

Mr. Simmons. I have exercised general supervision over the affairs 
of the company since I have been president. 

Mr. Townsend. Have you devoted your entire time ? 

Mr. Simmons. Not the entire time, no. 

Mr. Townsend. What proportion of your time have you devoted to 
the affairs of the railroad company? 

Mr. Simmons. I have been in constant contact with the office, and 
when my judgment has been asked upon any question that has been 
submitted to me I have given it. I have always attended the meet¬ 
ings of the board of directors, which take place twice a month. I am 
chairman of the executive committee, which holds its meetings twice 
a week. 

Mr. Townsend. How much stock do you hold in the company ? 

Mr. Simmons. One share. I had five shares, but I have only one. 

Mr. Townsend. How much are the shares? 

Mr. Simmons. One hundred dollars a share. 


6 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Townsend. Are five shares the most you have ever owned in 
the company? 

Mr. Simmons. Yes. 

Mr. Townsend. How many did you have in 1889, when you became 
a member of the company? 

Mr. Simmons. I don’t remember how many shares I had in 1889. 
I never held over five shares. 

Mr. Townsend. What is your salary, Mr. Simmons? 

Mr. Simmons. Ten thousand dollars a year. 

Mr. Townsend. What other officers does this company have? 

Mr. Simmons. We will give you the list of officers. 

Mr. Drake. That is a list of the officers [handing statement to Mr. 
Townsend]. 

Mr. Cromwell. The general superintendent has resigned. 

Mr. Townsend. So that J. Edwards Simmons is president and 
George Whaley is vice-president- 

Mr. Cromwell. Mr. Whaley has resigned. 

Mr. Townsend. This is the salary list also. 

Mr. Simmons. Yes. 

Mr. Drake. That is the salary list of the New York end of the 
railroad company. 

Mr. Townsend. I will ask you to look at that, Mr. President, and 
say if you can identify it as a correct statement of all the salaried 
officers and the salaries they individually receive, of the New York 
end of the Panama Railway Company [handing list to Mr. Sim¬ 
mons] . 

Mr. Simmons. It is correct, to the best of my knowledge and 
belief. 

Mr. Townsend. You may mark that, Mr. Reporter, as Exhibit 2. 

Exhibit No. 2. 

Panama Railroad Company salary list, January 23, 1905. 

Executive officers : Per annum. 

President_$10, 000. 00 

Vice-president and secretary_ 8, 500. 00 

General manager_ 7, 000. 00 

Secretary’s office: 

Assistant secretary_ 2, 400. 00 

Stenographer and typewriter_ 1, 000. 00 

Do_ 1, 000. 00 

Porter and messenger___ 600. 00 

Office boy_ 312.00 

Telephone hoy_ 216. 00 

Accounting department: 

Treasurer_ 5, 200. 00 

Freight cashier_ 1, 200. 00 

Teller and bank messenger_ 900. 00 

Auditor_ 3, 300. 00 

General clerk_ 1, 800. 00 

Bookkeeper_ 1, 620. 00 

General clerk and typewriter___ 1, 000. 00 

Clerk_ 1, 000. 00 

Manifest clerk_ 1, 020. 00 

Voucher record clerk_ 840. 00 

Manifest clerk_ 840. 00 

Do_ 540. 00 

Clerk and messenger_ 240. 00 

























INVESTIGATION OF PANAMA RAILWAY COMPANY. 7 

Traffic department: Per annum. 

Traffic manager- $6, 000. 00 

Chief clerk- l, 920. 00 

Freight solicitor- 1 , 800. 00 

Ticket agent- 1 , 500 . 00 

Manifest clerk_ 1 , 590 . 00 

Claim agent-l] 50o! 00 

Way-bill clerk- 1 , 200. 00 

Assistant freight solicitor and clerk_ 1, 080. 00 

Clerk- 900. 00 

Stenographer and typewriter_ 900.00 

Assistant manifest clerk_ 840. 00 

Messenger_ 720. 00 

Manifest typewriter_ 720. 00 

Billing clerk_ 720. 00 

Clerk- 720 ! 00 

Assistant manifest typewriter_ 540. 00 

Junior clerk_ 312. 00 

Inspecting engineer_ 2, 400. 00 

Clerk and typewriter_ 816. 00 

Purchasing agent- 1, 500. 00 

Clerk- 150. 00 

New York, January 23, 1905. 

PIER AND STEAMERS. 

• 

Pier No. 67. North River, New York: 

Terminal superintendent_ 3, 300. 00 

Clerk_ 1, 050. 00 

Office boy_ 360. 00 

Receiving clerk_ 1, 200. 00 

Assistant receiving clerk_ 900. 00 

Delivery clerk_ 1, 200. 00 

Baggage master, etc_ 960. 00 

Carpenter_ 1, 080. 00 

Cooper___ 1, 080. 00 

Head watchman ($3 per day)_ 1, 080. 00 

Tally clerk_•_ 780. 00 

Tallyman_ 720. 00 

Gateman_ 720. 00 

Per month 

Steamers : of 30 days. 

Captains_ $200. 00 

Mates_ 75. 00 

Second mates_ 50. 00 

Third mates- 40. 00 

Chief engineers_ 150. 00 

First assistant engineers- 90. 00 

Second assistant engineers_ 80. 00 

Third assistant engineers_ 70. 00 

Pursers_ 90. 00 

and- 75. 00 

Freight clerks_ 50. 00 

Stewards_ 75. 00 

and_ 65. 00 

Surgeons_ 50. 00 

Note.—E ach of the above receive $1 per day board while in port, New York. 

New York, January 23, 1905. 


















































8 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Exhibit No. 3. 

Panama Railroad Company—Salaries of general officers on the Isthmus. 

EXECUTIVE OFFICERS. 

Per annum. 

General superintendent_$6, 000.00 

Secretary to general superintendent and land agent_ 3, 300. 00 

Local auditor_ 2, 700. 00 

Cashier_ 2, 700. 00 

TRANSPORTATION DEPARTMENT. 

Assistant superintendent_ 3, 600. 00 

Train master_ 2, 280. 00 

Acting freight agent and port captain, La Boca_ 2, 700. 00 

Assistant freight agent and port captain, Colon_ 2, 700. 00 

MECHANICAL DEPARTMENT. 

Master mechanic_!_ 2, 700. 00 

ROAD DEPARTMENT. 

Road master_ 2, 700. 00 

SUPPLY DEPARTMENT. 

Commissary- 2, 700. 00 

LEGAL DEPARTMENT. 

Counsel, Panama_ 1, 728. 00 

Lawyer, Panama_ 1, 464. 00 

Real estate lawyer, Colon__ 1, 200. 00 

February 6, 1905. 

Mr. Drake. That list also includes the personnel of the steamers. 
Mr. Townsend. Has the amount of the salaries been changed any 
within the last year ? 

Mr. Simmons. Not any material changes; no, sir. 

Mr. Townsend. Has it within the last two years? 

Mr. Simmons. No, sir. 

Mr. Townsend. Are you prepared to tell what changes have been 
made in that list ? 

Mr. Simmons. I can not tell. 

Mr. Townsend. Does Mr. Drake know ? 

Mr. Simmons. Mr. Drake is the operating officer of the road; he 
can give the minor changes. There have been no material changes. 

Mr. Townsend. Have you a list of the officers at the Panama end of 
the road ? 

Mr. Drake. Yes, sir. 

Mr. Townsend. You stated that the first vice-president, Mr. 
Whaley, had resigned. 

Mr. Simmons. Yes. 

Mr. Townsend. When did he resign ? 

Mr. Cromwell. We will give you the date. September 13, 1904. 
Mr. Simmons. It must have been five months ago. 

Mr. Townsend. What was the occasion for his resignation ? 

Mr. Simmons. Well, he desired to retire. 

Mr. Townsend. Was his resignation voluntary on his part? 

Mr. Simmons. Entirely so. 

Mr. Townsend. The board did not request it? 

Mr. Simmons. No. 

Mr. Townsend. Wlio was elected in his place? 
















INVESTIGATION OF PANAMA RAILWAY COMPANY. 


9 


Mr. Simmons. Mr. Drake. 

Mr. Townsend. So you have abolished the office of first vice- 
president ? 

Mr. Simmons. Yes, sir. 

Mr. Townsend. Mr. Drake, who was second vice-president and sec¬ 
retary, is now first vice-president ? 

Mr. Simmons. He is now vice-president. We do not have any sec¬ 
ond vice-president and secretary. 

Mr. Townsend. Vice-president and secretary? 

Mr. Simmons. Yes, sir. 

Mr. Townsend. At what salary ? 

Mr. Simmons. I can not give the salary. 

Mr. Drake. A combined salary of $8,500 for both offices. 

Mr. Townsend. What was the second vice-president and secretary’s 
salary prior to Mr. Whaley’s resignation ? 

Mr. Drake. $8,500—the same as it is now. 

Mr. Townsend. So that now Mr. Drake is acting as vice-president 
and secretary, whereas he was formerly second vice-president and 
secretary; and receives $8,500. 

Mr. Cromwell. He performs the duties now formerly devolving 
upon the first vice-president. The first vice-president received how 
much? 

Mr. Drake. $5,500 per year. 

Mr. Townsend. Mr. Simmons, can you tell me what duties the 
first vice-president performed prior to Mr. Whaley’s resignation? 

Mr. Simmons. Do you mean Mr. Whaley’s duties when he was vice- 
president ? 

Mr. Townsend. Yes. 

Mr. Simmons. He represented the owners of the property over in 
Paris. He represented matters connected with the property here and 
the owners over there. He was our medium of communication. 

Mr. Drake. Pie was at the head of the European department ? 

Mr. Tow t nsend. What were the duties of the second vice-president 
prior to Mr. Whaley’s resignation ? 

Mr. Simmons. Well, his duties were here operating the road. He 
was the operating officer, and attended to the detail management of 
the office. 

Mr. Esch. Your charter specifies the duties of these officers? 

Mr. Cromwell. The by-laws do. 

Mr. Esch. Can we have a copy of the charter and the by-laws ? 

Mr. Cromwell. Yes, sir. 

Mr. Esch. 1 would like to have those filed as exhibits. 

The by-laws and charter of the Panama Railroad Company follow, 
and are marked “ Exhibit 4a and 4b.” 

Exhibit 4b. 

CHARTER AND AMENDED BY-LAWS OF THE PANAMA RAILROAD 

COMPANY. 

AN ACT to incorporate the Panama Railroad Company, passed April 7, 1849. 

The people of the State of New York, represented in senate and assembly, do 
enact as follows: 

Section 1. William H. Aspinwall, John L. Stephens, Henry Chauncey, James 
Brown, Cornelius W. Lawrence, Gouverneur Kemble, Thomas W. Ludlow, David 
Thompson, Joseph B. Varnurn, Samuel S. Howland, Prosper M. Wetmore, Edwin 


10 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Bartlett, Horatio Allen, and tlieir associates, successors, and assigns, are hereby 
constituted a body corporate, by the name of the “ Panama Railroad Company,’’ 
for the purpose of constructing and maintaining a railroad, with one or more 
tracks, and all convenient buildings, fixtures, machinery, and appurtenances, 
across the Isthmus of Panama, in the Republic of New Granada, under the 
grant made by the said Republic to the said William H. Aspinwall, John L. 
Stephens, and Henry Cliauncey, and of purchasing and navigating such steam 
or sailing vessels as may be proper and convenient to be used in connection with 
the said road; and for such purposes all the necessary and incidental power is 
hereby granted to the said corporation. 

Sec. 2. The capital stock of the said corporation shall be fixed by the directors 
at a sum not less than one million of dollars, with liberty to increase the same 
at any time to a sum not exceeding five millions of dollars. Said stock shall be 
divided into shares of one hundred dollars each, and shall be deemed personal 
property, transferable in such manner as the by-laws of the said corporation 
shall direct. The said corporation may commence operations when five hundred 
thousand dollars shall have been subscribed, and twenty per cent on each share 
subscribed for, paid in. The said William IL. Aspinwall, John L. Stephens, and 
Henry Chauncey shall be commissioners to receive subscriptions for the said 
capital stock, and if the whole capital stock shall not be subscribed at the time 
first appointed, other subscriptions may be at any time received, until the whole 
amount shall be subscribed, at such times and under such rules and regulations 
as they shall prescribe. 

Sec. 3. The concerns of the said corporation shall be managed by thirteen 
directors, who shall be stockholders, and who (except the first directors hereby 
appointed) shall hold their offices for one year, and until others are chosen in 
their places. The persons named in the first section of this act shall be the first 
directors, and shall hold their offices until the first Monday of April, in the year 
one thousand eight hundred and fifty-one. and until others are chosen in their 
places. The directors, except for the first two years, shall be annually chosen at 
such time and place in the city of New York, and on such notice as shall be 
directed by the by-laws of the said corporation. In all meetings of the stock¬ 
holders each share shall entitle the holder to one vote, to be given in person 
or by proxy. In case it should at any time happen that an election of directors 
shall not be made on the day appointed by the by-laws of the said corporation, 
the said corporation shall not for that cause be deemed to be dissolved, but 
such election shall be held on any other day which shall be appointed by the 
directors of said association. 

Sec. 4. The directors (of whom five shall constitute a quorum for the transac¬ 
tion of business) shall appoint one of their number to be president, and may 
appoint such other officers and agents as they shall deem necessary, and they 
may make and establish such by-laws, rules, and regulations as they shall think 
proper and expedient, touching the disposition and management of the property, 
estate, and effects of the said corporation; the transfer of shares, the duties and 
conduct of their officers and servants, the election and meeting of the directors, 
and all matters whatsoever which may appertain to the concerns of said cor¬ 
poration. When any vacancy, shall happen among the directors, it may be filled 
by the remaining directors; and the directors may remove all officers appointed 
by them, and appoint others in their place, and fill all vacancies in the offices. 

Sec. 5. The directors may require payments of subscriptions to the stock at 
such times and in such proportions as they may deem proper, under the penalty 
of forfeiting all stock and previous payments made thereon, and may sue for 
and recover all such subscriptions. Notice of the time and place of such pay¬ 
ments shall be published for four weeks previous to such time, at least once in 
each week, in two newspapers published in the city of New York. 

Sec. 6 . The said corporation may have a common seal, and the same may alter 
or renew at pleasure; and all contracts made may be either verbal or under the 
signature of the president, secretary, or other officer or agent of the said cor¬ 
poration, and with or without the corporate seal. 

Sec. 7. It shall be lawful for the said corporation to contract with the said 
William II. Aspinwall, John L. Stephens, and Henry Chauncey for the purchase 
of all the rights, privileges, and immunities granted to them by the said Repub¬ 
lic of New Granada, and for the purchase of the lands granted to them by the 
said Republic, and to receive a conveyance of and hold the same in like manner 
as the said William H. Aspinwall, John L. Stephens, and Henry Chauncey now 
do or can do; and to lease, or sell and convey any of such lands which the said 
corporation shall not deem it necessary to retain, and to build and construct all 
such buildings, piers, docks, basins, and harbors on the said lands as the said 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


11 


corporation may deem expedient, in like manner as the said William H. Aspin- 
wall, John L. Stephens, and Henry Ckauncey can do under the said grant. 

Sec. 8. The said corporation may borrow from time to time such sum or sums 
of money as may be necessary to complete said road, and for the other purposes 
authorized by this act, in the whole not exceeding the amount of the capital 
stock actually paid in. and may issue and dispose of their bonds for any amount 
so borrowed; and are hereby authorized to mortgage any part of their corporate 
property and privileges to secure the payment of such bonds; and the said direc¬ 
tors may confer on the holder of any bond they may issue, for any money so 
borrrowed, the right to convert the principal due thereon into stock of the said 
corporation at any time not exceeding five years from the date of said bond, 
under such regulations as the directors may see fit to adopt, and for such pur¬ 
pose the said corporation are authorized to increase its capital stock to the 
amount so borrowed, whenever the persons, or any of them, to whom such 
money is due shall elect to convert the same into stock ; but nothing herein con¬ 
tained shall be construed to authorize an increase of the capital stock of said 
company beyond the sum of five millions of dollars. 

Sec. 9. Each and every stockholder shall be individually liable to the creditors 
of said corporation for all debts that may be due and owing by said corporation 
to their laborers and servants for services performed, and for all other debts 
and liabilities of the said corporation, to an amount equal to the amount of stock 
held by him, until he shall have paid in full the amount of such stock so held. 
But no stockholder shall be personally liable for the payment of any debt con¬ 
tracted by the said corporation which is not to be paid within one year from the 
time the debt is contracted, nor unless a suit for the collection of such debt shall 
be brought against said corporation within one year after the debt shall become 
due; and no suit shall be brought against any stockholder in said corporation 
for any debt so contracted, unless the same shall be commenced within two 
years from the time he shall have ceased to be a stockholder in said corporation, 
nor until an execution against the corporation shall have been returned unsatis¬ 
fied in whole or in part. No person holding stock in said company as executor, 
administrator, guardian, or trustee, and no person holding such stock as col¬ 
lateral security, shall be personally subject to any liability as a stockholder of 
said company, but the person pledging such stock shall be considered as holding 
the same, and shall be liable as a stockholder accordingly, and the estate and 
funds in the hands of such executor, administrator, guardian, or trustee shall be 
liable in like manner and to the same extent as the testator, or intestate, or the 
ward, or person interested in such fund, would have been if he had been living 
and competent to act, and held the stock in his own name. Every such executor, 
administrator, guardian, or trustee shall represent the shares of stock owned 
by him as such administrator, guardian, or trustee at all meetings of the com¬ 
pany, and may vote as a stockholder, and every person pledging his stock as 
aforesaid may in like manner represent the same and vote accordingly. 

Sec. 10. This act shall take effect immediately. 


AN ACT to amend the act entitled “An act to incorporate the Panama Railroad Com¬ 
pany,” passed April 7, 1849, passed April 12, 1855. 

The people of the State of Neic York , represented in senate and assembly , do 
enact as folio tvs: 

§ 1. It shall be lawful for the Panama Railroad Company to borrow, from 
time to time, in addition to the amount limited by the act to incorporate said 
company, passed April 7, 1849, such sum or sums of money as may be necessary 
to complete their road, and for the other purposes authorized by said act; to issue 
and dispose of their bonds for the reimbursement of any amount to be borrowed, 
or which may have been borrowed by them, and to mortgage any part of their 
corporate property and privileges, to secure the payment of said bonds; and they 
may confer upon the holder of any bond which they may so issue the right to 
convert the principal represented thereby into the stock of said corpoiation, at 
miy time not exceeding five years from the date of said bond, under such legula- 
tions as the directors may see fit to adopt, whenever any person or persons hold¬ 
ing any such bond shall elect to convert the same into stock; and for such pur¬ 
pose the said incorporation are hereby authorized to increase their capital stock 
from time to time; so, however, that the whole capital of said company shall 
not exceed the sum of seven millions of dollars, anything in said act to the 
contrary notwithstanding. 

§ 2. This act shall take effect immediately. 


12 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


EXHIBIT 4a. 

AMENDED BY-LAWS OF THE PANAMA RAIL ROAD COMPANY. 

Amended By-Laws. 

Article I. 

The election for directors of this company shall be held at the officei of the 
company, in the city of New York, on the first Monday of April in each year. 

Three stockholders shall be chosen by the board, at a preceding meeting, to 
act as inspectors. The polls shall be opened at noon, and continue open until 
two o’clock in the afternoon. 

The board of directors shall consist of thirteen stockholders, five of whom, if 
the president or vice-president be one, shall constitute a quorum for the transac¬ 
tion of business at the meetings of the board. 

Article II. 

The officers of this company shall consist of a president, a vice-president, a 
secretary, an assistant secretary, and a treasurer, the three latter to hold 
office at the pleasure of the board. The offices of vice-president and secretary 
may be filled by one person. 

The president and vice-president shall always be members of the board of 
directors, and the said officers shall be elected by the board annually, within 
eight days after the election of the directors. The vote shall be by ballot, and 
a majority of all the members of the board shall be necessary to a choice. 

In addition to the officers before named, the board may from time to time 
appoint a general manager and such additional officers, engineers, and agents 
as the business of the company may require. 

The salaries of the several officers, engineers, or agents shall be fixed by the 
board, and no extra allowance or compensation shall be made except with the 
approbation of the board. 

In case of any failure to hold any election for officers, those in office shall 
hold their places and be legally qualified to act until an election shall be held. 

Article III. 

The duties of the president shall be to preside at the meetings and to exer¬ 
cise a general supervision over the affairs of the company. He shall have power 
to call meetings of the directors at such time or times as he shall think proper, 
and it shall be his duty to call such meetings upon the written requisition of 
two or more of the directors stating the object for which they wish such meet¬ 
ings convened. 

The vice-president shall, in the absence of the president, exercise all the pow¬ 
ers and functions which may in any way be delegated to the president. 

Article IV. 

It shall be the duty of the secretary to be present at the meetings of the 
board, to keep a record of all its proceedings, and to enter the same in the 
minute book; to send notices to the directors of all meetings which are to be 
held, and attend to such other duties as may be directed by the president or the 
vice-president. 

The assistant secretary shall, in the absence of the secretary, exercise all the 
powers and functions which may in any way be delegated to "the secretary. 

Article V. 

It shall be the duty of the treasurer to receive and disburse under the direction 
of the board, all moneys belonging to the company, and to keep regular and sys¬ 
tematic accounts of all such receipts and disbursements, and to make detailed 
reports of such receipts and disbursements to the directors at each stated meet¬ 
ing of the board. He shall cause to be deposited all moneys received by him for 
or on account of the company in such bank or banks as "the board may select, 
or to make such disposition of the funds as the board of directors or the finance 


INVESTIGATION OE PANAMA RAILWAY COMPANY. 


13 


committee may direct; and all deposits in banks shall be entered in a book in 
the usual way to the credit of the company. 

All checks and orders upon the funds of the company shall be drawn on the 
bank or institution in which the money of the company may be deposited, and 
such checks and orders shall be signed by the president, or vice-president, and 
the treasurer; or by the president, or vice-president, and a director to be 
appointed by the board: or, in the absence of the president and vice-president, 
by the treasurer and a director to be appointed by the board; and be drawn to 
the order of the party to whom the payment is made. 

However, in cases of payment for wages due persons in the employ of the 
company, the checks drawn upon a special deposit in bank, called the Isth¬ 
mus Draft Account, shall be signed by either oue of the following persons: 
The president, the vice-president, the treasurer, or a director designated by the 
board. 

The treasurer shall register all transfers of stocks, and for this purpose he 
shall keep the account of the stock registered and transferred in such form and 
manner and under such regulations as the board of directors may from time to 
time prescribe, and it shall be his duty to examine and audit accounts, and to 
attend to such other duties as may be designated by the president or vice-presi¬ 
dent. 

The treasurer shall also keep the dividend books and record of bonds, attend 
to the payment of dividends and interest money. 

Article VI. 

It shall be the duty of the general manager to have charge of and to manage, 
under the direction of the president or vice-president, the practical operations 
of the rail road and steamship lines and transportation interests of the company. 

Article VII. 

All transfers of stock shall be made in the usual form, by the stockholders 
signing, in proper person or by attorney, in a book to be prepared and kept by 
the treasurer for that purpose a declaration of sale or transfer, setting forth 
the number of shares transferred, the person to whom, and the time when, the 
same are so transferred; and at the time of such transfer the old certificates 
of the shares so transferred shall in all cases be surrendered and canceled and a 
new certificate shall be issued in lieu thereof.* 

All certificates issued shall be signed by the president, or the vice-president, 
and the secretary. 


Article VIII. 

There shall be a stated monthly meeting of the board of directors on the sec¬ 
ond and fourth Thursday of each month. 

A full and complete statement of the affairs of the company shall be sub¬ 
mitted to the board of directors at any regular or special meeting held in the 
month of March, showing the result of the operations of the company for the 
preceding fiscal year ending December Hist. 

Dividends may be declared at any meeting of the board of directors, stated 
or otherwise, payable at such times as the board may appoint. 


Article IX. 

There shall be a standing committee, to be denominated the executive and 
finance committee, to be composed of the president, vice-president, and four 
members of the board, appointed quarterly by the president, whose duty it 
shall be to attend to the general management of the finances and the current 
business of the company during the intervals between the stated meetings of 
the board. The said committee shall have all the powers and exercise all the 
functions of the board of directors, provided always that it does not transcend 
the specified regulations and instructions of the board pie\ iously adopted. And 
the said committee shall report at each stated meeting of the board a full and 
explicit account of its proceedings and transactions during the month, a record 
of which shall be kept in proper books to be provided for that purpose. Meet¬ 
ings shall be held twice a week, and three members of said committee shall con¬ 
stitute a quorum for the transaction of business. 


I 


14 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Article X. 

All books and papers of tlie company shall be at all times open to the inspec¬ 
tion of the board, or any member thereof. 

Article XI. 

The order of proceedings at the meetings of the board shall be: 

1st. Reading of the minutes. 

2d. Reports of the standing committee. 

3d. Reports of select committees. 

4th. Miscellaneous business. 

Article XII. 

These by-laws may be amended at any meeting of the board, provided such 
amendment shall have been previously handed to the president in writing, and 
that a majority of all the members of the board consent thereto. 

Mr. Townsend. When Mr. Drake assumed the duties of first vice- 
president and secretary did he represent the Paris end of the matter, 
the same as Mr. Whaley had done before ? 

Mr. Simmons. We had no Paris end of the matter then. Mr. 
Whaley resigned after the property had been conveyed to the United 
States. 

Mr. Cromwell. He had full charge of our steamship interests in 
Europe, as head of the European department, adjusting tariffs with 
the foreign lines, collecting balances, settling controversies, advising 
upon practical questions of operation and policy, and giving the ben¬ 
efit of his great experience as a railroad manager. He is a distin¬ 
guished railroad engineer and manager, having been general manager 
of the Western Railroad of France and a consulting engineer on 
many great works. Pie more than earned his salary. 

Mr. Townsend. So Mr. Drake assumed the duties of first vice- 
president and those he had been performing before? 

Mr. Simmons. Yes, sir. 

Mr. Townsend. I show you this paper, Mr. President, and ask you 
if that is a correct statement of the officers connected with the Pan¬ 
ama Railroad at Panama [handing a paper to Mr. Simmons] ? 

Mr. Simmons. To the best of my knowledge and belief, they are: 
yes. 

Mr. Drake. Those are the officers? 

Mr. Townsend. Do you identify these [handing pamphlet to Mr. 
Simmons] as the by-laws and the copy of the charter ? 

Mr. Simmons. Yes, sir. 

Mr. Townsend. Those may be marked “ Exhibit 4a ” and “ Exhibit 
4b.” 

Now you stated that Mr. Shaler had resigned as general superin¬ 
tendent of the road at the Isthmus. When did he resign ? 

Mr. Drake. The first of February; with leave of absence to the 
end of the fiscal year, April 3. 

Mr. Townsend. Please give the cause of his resignation. 

Mr. Simmons. One cause was the illness of his wife. 

Mr. Townsend. Was his resignation also voluntary? 

Mr. Simmons. It was. 

Mr. Townsend. He had not been requested to resign by the com¬ 
pany ? 

Mr. Simmons. No, sir; on the contrary, for two years his resigna- 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 15 

tion had been in the hands of the officers to be accepted at any time. 
He was anxious to get away. 

Mr. Townsend. Who succeeded him as general superintendent ? 

Mr. Simmons. H. Iy. Prescott. 

Mr. Cromwell. He was assistant general superintendent, and be¬ 
came acting general superintendent. 

Mr. Simmons. We have not filled that vacancy. He is performing 
the duties of general superintendent; he has not been appointed gen¬ 
eral superintendent. 

Mr. Townsend. Now, are you prepared to testify in regard to the 
financial condition of the road, Mr. Simmons? 

Mr. Simmons. In a general way. I can not go into the details, 
you know. 

Mr. Townsend. In your report of December 31, 1903, you refer to 
“ The sinking fund 6 per cent subsidy bond,” original issue of 
$3,000,000? What was the issue for; what were they issued for in 
the first place ? 

Mr. Simmons. That was long before I came into the company. 

Mr. Townsend. If you are not familiar- 

Mr. Cromwell. It is in the annual reports. 

Mr. Townsend. You can not tell when those bonds went out? 

Mr. Cromwell. In 1880. 

Mr. Townsend. Do you know what they were issued for ? 

Mr. Simmons. No; I did know, but I do not recall just now. 

Mr. Townsend. How much of the stock of the Panama Railroad 
Company is owned by parties outside of the United States ? 

Mr. Simmons. I think about a thousand shares; in that neighbor¬ 
hood. 

Mr. Townsend. Have you a record of the owners of those shares ? 

Mr. Simmons. We have a record of those who are stockholders, 
but it does not signify that because a man is reported here as a holder 
of stock that he is an owner. 

Mr. Townsend. And that record, to the best of your knowledge 
and belief, represents the holders of that stock, so far as you know? 

Mr. Simmons. Oh, yes. Here is the list of the present stockholders 
[handing list to Mr. Townsend]. 

Mr. Townsend. That is a list of what date ? 

Mr. Cromwell. That is the list of the stockholders of the company 
as they stand to-day. 

The" Chairman. Have you another copy of that ? 

Mr. Cromw t ell. That copy is for you. 

Mr. Tow t nsend. I would "ask you, Mr. President, to look that over 
and see if that is a correct list of the stockholders of the Panama Rail¬ 
road Company, as shown by your books on January 31, 1905. 

Mr. Simmons. To the best of my knowledge and belief that is a 
correct list. 


16 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


The stock list is as follows: 


Exhibit 5. 


List of stockholders of the Panama Railroad Company. 


Names. 


Addresses. 


Num¬ 
ber of 
shares. 


Brown, Vernon H. 

Buchanan, J. G. 

Burr, William H. 

Cromwell, Wm. Nelson.. 

Cahen, Rudolph T., Marquis de 
Torre Alflna. 

Cahen. Ugo. 

Coudert, Chas (deceased). 

Comstock, C. B. 

Davis, Geo. W. 

Drake, E. A... 

de Lesser, A. L. F. B. C. 

de Lesser, A. R. A. C. 

d’Espeyran, Felix Guillaume Saba¬ 
tier. 

d’Espeyran, Mme. L. C. C. le Barrois 
d’Orgeval Sabatier. 

Dinsmore, W. B. 

d’Anvers, Loulia Cahen. 

d’Anvers, Louis Cahen. 

Einsiedler, Chas. 

Escott, Rev. Edward Sweet; Cox, 
Henry Fisher. 

Felton. Samuel M. 

Garr, George (deceased). 

Gallaway, Robert M. 

Gebhard, Wm. H...... 

Gordon, James R. 

Grunsky, Carl Ewald. 

Haines, Augustus Montague. 

Harrod, Benj. M. 

Hecker, Frank J .. 

Hopkins, A. Lawrence.. 

Hudson, Woodward.. 

Hurtado, Jose Marcelino. 

James, Angelina Henrietta. 

Jennings, F. B. 

Leverich, Fannie F. J. 

Mackay, Mary C. 

Manning, Mary.. 

Manning, John B. 

Maddock, Henry. 

Mills, D. O .... 

Motley, J. M.. 

Monteflore, Edouard Levi. 

Murray, Williama. 

McCullough, John G. 

Newton, Anna M. 

Oppenheim, Ernest L. 

Oppenheim, E. L.,& Co. 

Park, T. L.... 

Parker, J. H. 

Parsons, Wm. Barclay. 

Palmedo, U. 

Pegler, Stephen Francis,and Francis 

Phipard, Harvey Fisk. 

Phipard, Wm. George. 

Phipard, Clarence Lester. 

Raphael, Lewis.. 

Savile, John Henry, and John Man- 
der, executors estate Anne Raph¬ 
ael. 

Simmons, J. Edward. 

Taft, Wm.H., Secretary of War. 

Von Hoifman,L., & Co. 

Walker, J. G., chairman Isthmian 
Canal Commission. 

Whaley, George. 

J. G. Walker. 


29 Broadway, New York. 

27 Pine street, New York. 

Isthmian Canal Commission, Washington, D. C- 

49 Wall street, New York. 

I Care of L. von Hoffman & Co., 58 Wall street, 

| New York. 

71 Broadway, New York. 

124 East 27th street, New York. 

Washington, D.C. 

24 State street, New York. 

ICare of Mallet Freres, 37 Rue d’Anjou, Paris, 

/ France. 

j-7 Rond Point des Champs Elysees, Paris, France.. 

59 Broadway, New York. 

Care of L. von Hoffman & Co., 56 Wall street, New 
York. 

.do. 

37 William street, New York. 

The Red Cottage, Lyme Regis, England. 

Railway Exchange Building, Chicago, Ill. 

14 West 45th street, New York.. 

42 Wall street, New York .. 

Care of C.H. Bachem, 44 Broadway, New York ... 
Care of Czarnikow, MacDougall & Co., 112 Wall 

street, New York. 

1 Isthmian Canal Commission, Washington, D. C ... 
Care of Kennedy, Tod & Co., 45 Wall street, New 
York. 

Washington, D. C.. 

.do.. 

Williamstown, Mass... 

Care of Boston and Albany R. R., Boston, Mass_ 

149 Via Torino, care of Hurtado & Co., Rome, Italy. 
99 Grove Lane, Denmark Hill, London, England .. 

15 Broad street, New York. 

48 Wall street, New York, care of C. D. Leverich 

& Bro. 

Care A. K. Mackay & Co., 6 Wall street, New York. 
Care of J. B. Manning, 2 Wall street, New York... 

2 Wall street, New York... 

158 South Oxford street, Brooklyn, N. Y. 

15 Broad street, New York. 

68 Broad street, New York.. 

36 Avenue Henri Martin, Paris, France. 

Care of Czarnikow, MacDougall & Co., 112 Wall 
street, New York. 

21 Cortlandt street, New Yoi’k.... 

Stonleigh Court, Washington, D. C. 

Johnston Building, New York. 

.do. 

345 Broadway, New York. 

Cotton Exchange Building, New York .. 

Isthmian Canal Commission, Washington, D. C_ 

Care of L. Von Hoffman & Co., 56 Wall street, New 
York. 

Amscott House, East Retford, England.. 

ICare of H. F. Phipard, Singer Manufacturing 
j Company, 149 Broadway, New York. 

Care of Kennedy, Todd & Co., 45 Wall street, New 
York. 

.do. 


14 Nassau street, New York. 

Washington, D. C. 

56 Wall street, New York. 

Isthmian Canal Commission, W ashington, D. C. 

7 Rue Louis le Grand, Paris, France. 

Isthmian Canal Commission, Washington, D. C 


1 

1 

1 

30 

10 

10 

1 

1 

1 

1 

23 

23 
28 

24 
1 

20 

20 

1 

37 

1 

1 

1 

10 

70 

1 

18 

1 

1 

1 

5 

2 

59 

3 

13 

5 

10 

234 

1 

1 

5 

18 

15 

3 

1 

32 

129 

3 

1 

1 

10 

84 

2 

1 

1 

14 
14 


1 

68,887 

10 

94 

1 

1 


Total 


70,000 


New York, N. Y., January 31 , 1905. 


S. Demin g, Treasurer . 









































































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 17 

Mr. Drake. By the terms of the by-laws the treasurer has charge 
of the stock list. 

Mr. Cromwell. It is a perfect list from the records. 

Mr. Townsend. Have you a stock ledger which shows the tranfers 
of your stock ? 

Mr. Simmons. Yes. 

Mr. Townsend. I would like to look at that, if you please. 

Mr. Simmons. We have everything here you may want. 

Mr. Cromwell. We have the stock books for fifty years back; every 
transfer is there. 

Mr. Simmons. Do you ask for the stock ledger? 

Mr. Townsend. Yes. 

Mr. Simmons. I will give it to you. 

Mr. Drake. Mr. Deming, will you show the stock ledger ? 

The Chairman. May I ask who is Mr. Deming? 

Mr. Drake. Mr. Deming is the treasurer of the company. I will 
mention to the committee that article 4 of the by-laws provides that 
the treasurer shall have charge of the stock ledger. 

Mr. Townsend. Then Mr. Deming may be sworn. 

STATEMENT OF SYLVESTER DEMING, TREASURER OF THE 
PANAMA RAILROAD COMPANY. 

Sworn by the chairman. 

Mr. Townsend. What is your full name? 

Mr. Deming. Sylvester Deming. I have been treasurer of the 
Panama Railroad Company for eight years, and as such have charge 
of the stock and of the stock transfer books, which I now produce. 
The stock list dated January 31,1905, is correct. 

The Chairman. You mean the list heretofore presented ? 

Mr. Deming. It is correct, and was prepared by me. 

Mr. Townsend. I will ask you, Mr. President, to turn to your stock 
ledger and tell me when Mr. Frank J. Hecker became a stockholder 
in this company. 

Mr. Cromwell. Do you not wish Mr. Deming to answer that ? 

Mr. Townsend. If the president is not familiar. 

Mr. Deming. Frank J. Hecker had one share of stock transferred to 
his name October 25,1904. 

Mr. Townsend. From whom was it transferred ? 

Mr. Deming. I will have to go deeper into it for that, sir. 

Mr. Cromwell. Just refer to the record; I think I qualified him 
first out of my own shares. 

Mr. Deming. Mr. Hecker’s stock was transferred to him by Mr. 
Cromwell on the 25th of October, 1904. 

Mr. Townsend. Does Mr. Hecker still own that share of stock ? 

Mr. Deming. It still stands in his name; yes, sir. 

Mr. Townsend. Do you know T wdiether he purchased that share of 
stock himself or not ? 

Mr. Deming. I have no means of knowing that. 

Mr. Townsend. Do you know about that, Mr. President ? 

Mr. Simmons. No ; I do not. 

The Chairman. Mr. Cronrwell knows, I think. 

Mr. Cromwell. I can tell you. 


PAN RY— 05-2 


18 


INVESTIGATION OF PANAMA RAILWAY COMPANY, 


The Chairman. Can you answer, Mr. Cromwell, as to whether Mr. 
Hecker purchased this stock and from whom ? 

. Mr. Cromwell. He did not purchase it. As counsel of the com¬ 
pany I temporarily qualified him as a director with a share of my 
own. 

The Chairman. What do you mean by “ temporarily? ” 

Mr. Cromwell. I transferred it into his name so that he became the 
owner in law. Afterwards it was returned to me by the chairman of 
the Commission out of the Government’s shares. 

The Chairman. He is not the owner now ? 

Mr. Cromwell. That one share of stock was transferred by me to 
Mr. Hecker, and he remained owner in law of that share. Admiral 
Walker later transferred one share of stock to me in reimbursement. 

The Chairman. You are, in fact, the owner of that share of stock? 

Mr. Cromwell. Not of that identical share, for that remained in 
his name. To qualify Mr. Hecker as director, and for the conven¬ 
ience of the United States Government an to facilitate the affair, I 
transferred to Mr. Hecker one share of my stock, as I had done on 
other occasions for other directors, and later the Isthmian Canal 
Commission replaced the share which I thus had transferred to Mr. 
Hecker by giving me one share of their own, which share replaced 
the one I had transferred to Mr. Hecker. 

Mr. Townsend. So there was no money paid for the transfer of the 
share of stock which was transferred originally to Mr. Hecker ? 

Mr. Cromwell. No, sir. 

Mr. Townsend. The Isthmian Canal Commission had the stock, 
and transferred one share to you in place of the one you transferred 
to him? 

Mr. Cromwell. Yes, sir; purely a transaction of convenience. 

Mr. Townsend. Was every commissioner treated in the same way? 

Mr. Cromwell. They were. I qualified each of the commissioners 
with my own shares. Later the Commission restored to me an equal 
number from the United States shares. 

Mr. Townsend. Did any of the commissioners own more than one 
share ? 

Mr. Cromwell. No, sir. 

Mr. Deming. Our records show that each of the commissioners 
held one share; and in addition to that Admiral Walker holds, as 
chairman of the Commission, 94 shares of the stock. 

Mr. Townsend. Where did Admiral Walker get those shares? 

Mr. Deming. Purchased the stock here in New York. 

Mr. Townsend. Can you tell of whom? 

Mr. Deming. Of Mr. E. D. Murphy, a broker on Wall street. 

Mr. Drake. The transfer books so show and we know it of our own 
knowledge. 

Mr. Townsend. Can you tell when he purchased those shares? 

Mr. Simmons. We can tell when they were transferred on the books. 

Mr. Deming. They were transferred on the 21st of October, 1904, 
and the payment therefor was made at the same time. I know this, 
because the check of the assistant treasurer of the Commission passed 
through my hands. 

Mr. Townsend. So you know that was the date? 

Mr. Deming. That was the date of the payment for the stock. 


INVESTIGATION OF PANAMA KAILWAY COMPANY. 


19 


Mr. Townsend. The payment passed through your hands, you say? 
How much was it? 

Mr. Deming. Ten thousand dollars, for 100 shares at par. 

Mr. Townsend. That is what he paid for them ? 

Mr. Deming. That was paid by the Commission. 

Mr. Cromwell. Purchased for the Commission? 

Mr. Simmons. In the name of Admiral Walker as chairman. 

Mr. Deming. Paid by the treasurer of the Commission. 

Mr. Townsend. Did you say that they were transferred to Admiral 
Walker as chairman of the Commission? 

Mr. Deming. Yes, sir; 100 shares were transferred to the chairman 
of the Isthmian Canal Commission. 

Mr. Cromwell. And then six of these shares were transferred by 
him, one each to the other members of the Commission, and the 
remaining 94 shares continued in his name as chairman of the Com¬ 
mission. That is all there is of that. These are the 100 shares 
referred to in the report of Secretary Taft as having been purchased 
by the Government? 

Mr. Drake. I have here on that subject a telegram from Admiral 
Walker to me, saying: 

Will you pay $10,000 upon delivery to you of 100 shares of Panama Railroad 
stock purchased by the Commission, and place same in my name. I will reim¬ 
burse you as soon as proper vouchers can be prepared. 

J. G. Walker, Chairman. 

And this is Admiral Walker’s letter of October 19: 


Referring to my telegram of to-day the treasurer of the Commission has not 
arrived at the office, and therefore I asked you if you will pay for the shares 
for the United States. Later the treasurer came in, and I arranged with him 
to make the payment. 

I inclose vouchers covering this purchase, made out in the name of E. D. 
Murphy, 51 Wall street, who agrees to sell the stock. The vouchers must be 
receipted by him. If the stock is not in his name it must be transferred to him, 
and by him transferred to me as chairman of the Canal Commission, as the 
money must be paid to the actual owner of the stock. 

I also inclose a check for $10,000 on the assistant treasurer of the United 
States in New York, payable to Mr. Murphy’s order, which you are authorized 
to give him in payment of the stock, conditioned as above. 

I shall notify Mr. Murphy at once that you will make payment when the 
stock is transferred to me. 

Thanking you very much for your willingness to pay the money yourself, but 
as it now seems unnecessary, I am taking a different course. 


Very truly, yours, 


J. G. Walker, 

Chairman of the Committee . - 


Mr. Townsend. Now, Mr. Deming, I will call your attention to 
page 169 of your stock ledger, and ask you to read the items there in 
connection, first, with “ J. G. Walker account, chairman of the Isth¬ 
mian Canal Commission,” so we may have that in the record. 

Mr. Deming. Shall I give the answer? 

Mr. Townsend. Yes, sir. 

Mr. Deming. The following is the transcript of the stock ledger: 
J. G. Walker had transferred to his name, individually, on the 13th 
of July, 1904, one share of stock by William Nelson Cromwell. That 
still stands in his name; there never has been any change in that item. 
J. G. Walker, as chairman of the Isthmian Canal Commission, had 
transferred to his name as chairman on the 20th of October, 1904, by 


20 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


E. T). Murphy, 100 shares. From that stock on the 26th of October, 
1904, he transferred, as chairman, 93 shares to J. G. Walker as chair¬ 
man; to William Nelson Cromwell 7 shares. On the 19th December, 
1904, there was transferred to J. G. Walker, chairman of the Isthmian 
Canal Commission, by Robert Cheesebrough, 1 share, leaving 94 
shares standing in the name of Admiral Walker as chairman of the 
Isthmian Canal Commission. 

Mr. Townsend. Can you tell why he transferred seven shares to 
Mr. Cromwell? 

Mr. Deming. To return to him its seven shares that had been trans¬ 
ferred by Mr. Cromwell, at various times, to members of the Com¬ 
mission, so that they might qualify as directors. This was the expla¬ 
nation given at the time, as I understand it. 

Mr. Townsend. Then there are 94 shares that stand at the present 
time in the name of Mr. Walker, chairman of the Isthmian Canal 
Commission ? 

Mr. Deming. Yes, sir. 

Mr. Townsend. And each of the other commissioners hold the 
original one share that was transferred to him? 

Mr. Deming. Yes, sir. 

Mr. Cromwell. Seven shares plus the 94 make up the 101 shares 
which the United States Government has bought since the purchase 
from the New Panama Canal Company. 

Mr. Townsend. How many shares has the United States Govern¬ 
ment purchased of this railroad company’s stock since the original 
purchase ? 

Mr. Deming. One hundred and one shares; that is, they were pur¬ 
chased by the Isthmian Canal Commission. 

Mr. Townsend. And they stand in the name of the Isthmian Canal 
Commission ? 

Mr. Deming. The chairman of the Commission. 

Mr. Cromwell. Ninety-four in the name of the chairman of the 
Commission, and seven in the names of the several members of the 
Commission ? 

Mr. Townsend. Are those all the shares purchased for the United 
States Government since the original purchase? 

Mr. Deming. All of the shares that have been transferred on the 
books. 

Mr. Townsend. Now, did this company, Mr. President, declare a 
dividend in 1902? 

Mr. Simmons. The records will show you. 

Mr. Townsend. Can not you tell? 

Mr. Simmons. Yes, we declared a dividend in 1902. 

Mr. Townsend. Of how much ? 

Mr. Simmons. Four per cent. 

Mr. Townsend. Did you declare a dividend in 1901 ? 

Mr. Simmons. Yes, a dividend of 2 per cent. 

Mr. Townsend. And in 1900 ? 

Mr. Simmons. No. 

Mr. Townsend. No dividend in 1900? 

Mr. Simmons. No. 

Mr. Townsend. Did you declare a dividend in 1899 ? 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 21 

Mr. Simmons. I can not remember without referring to the books. 
The books will tell. 

Mr. Deming. Can I answer that? 

Mr. Townsend. Yes. 

Mr. Deming. No dividends were declared between 1893 and 1901. 

Mr. Esch. Inclusive ? 

Mr. Simmons. From 1893 to 1900, inclusive. There was a divi¬ 
dend m 1901. 

Mr. Townsend. That was a dividend of 2 per cent in that year? 

Mr. Deming. Yes, sir. 

Mr. Townsend. Mr. Simmons, please answer the question. There 
was no dividend declared from 1893 to 1900, both inclusive? 

Mr. Simmons. No, sir. 

Mr. Townsend. But your next dividend was in 1901, of 2 per cent. 

Mr. Simmons. Yes, sir. 

Mr. Townsend. In 1902 it was 4 per cent? 

Mr. Simmons. Yes, sir. 

Mr. Townsend. What did you declare as your dividend in 1903? 

Mr. Simmons. Eight per cent. 

Mr. Esch. 1904 is now complete. You may add that. 

Mr. Townsend. How many payments were made of that dividend 
in 1903 ? 

Mr. Simmons. The books will show. 

Mr. Drake. The books will have to be obtained. Mr. Deming, 
will you get the books ? 

Mr. Deming. May I correct my testimony to this extent: That we 
paid January 3, 1893, 2 per cent. I don’t know whether that was 
declared in 1892 or not, but it was paid in 1893, January 3. 

Mr. Simmons. Probably declared in 1892. 

Mr. Drake. The minutes are exact. We have everything dated, 
signed, and certified. 

Mr. Townsend. I want to know the history of your dividend in 
1903, as to how it was made. 

Mr. Simmons. Eight per cent. 

Mr. Deming. April 3, 1903, 2 per cent; October 1, 1903, 2 per cent; 
January 1, 1904, 4 per cent—that was declared in 1903, but the actual 
payment, the actual sending out of the checks, was on the 3d of Jan¬ 
uary, 1904. 

Mr. Townsend. Will you begin with the minutes on that, as to 
when you first declared the first dividend of 2 per cent in 1903 ? 

Mr. Simmons. We paid tw r o each of 2 per cent, and then the one of 
4 per cent, making three dividends. 

Mr. Drake. The minute books of the meeting of March 26, 1903, 
shows a resolution adopted by the executive committee of the board 
of directors as follows: 

Resolved, That the recommendation of the executive committee, adopted at 
the meeting of March 13, that a further dividend of 2 per cent be declared out 
of the net earnings of the company for the year 1902 is approved and adopted: 
and, further, resolved that such dividend be made payable on April 3, 1903, for 
stockholders of record on April 1, the date of the closing of the books for the 
purpose of the annual election. 

Mr. Townsend. So that w^as a dividend out of the earnings of 1902? 

Mr. Deming. Yes; so declared. 


22 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Drake. At a meeting of the board of directors on the 24th of 
September, 1903, the following action was had : 

Consideration was had of the action of the executive committee at its meeting 
of the 22d instant, recommending that a dividend of 2 per cent on the capital 
stock be declared, and the motion was duly seconded, and it was unanimously 
resolved, that a dividend of 2 per cent on the capital stock of this company be, 
and the same is hereby, declared payable on October 1, 1903, to the stockholders 
of record on September 28. For that purpose the books were closed on Septem¬ 
ber 28, and reopened on October 3. 

At a meeting of the board of directors held on September 10, 1903, 
reference was had to the recommendations of the executive committee 
adopted at its meeting of the 8tli instant, viz: 

That a dividend of 4 per cent upon the capital stock of the company be de¬ 
clared, and upon motion duly seconded the following resolution was unanimously 
adopted: 

Resolved, That a dividend of 4 per cent on the capital stock of the company 
is hereby declared out of the net earnings of the company, payable January 3, 
1904, for stockholders of record on December 28, 1903, and that for that purpose 
the books of the company were closed on December 28, 1903, and reopened on 
January 2, 1904. 

Mr. Townsend. Those dividends w r ere paid, were they, Mr. Presi¬ 
dent? 

Mr. Simmons. They were. 

Mr. Townsend. From what fund were they paid? 

Mr. Simmons. From the accumulated earnings of the company. 

Mr. Townsend. Did you have accumulated earnings sufficient for 
the payment of dividends from 1894 to 1900, inclusive ? 

Mr. Simmons. Oh, yes. 

Mr. Townsend. AYhat was the reason no dividends were paid dur¬ 
ing those years ? 

Mr. Simmons. Well, the principal stockholders of the company did 
not want any dividends, and all preferred that the net earnings 
should be accumulated by the company. 

Mr. Townsend. Then they changed that policy in 1901, and con¬ 
cluded to declare a dividend ? 

Mr. Simmons. Yes; we thought we had accumulated enough to 
declare it; more than enough to spare. 

Mr. Townsend. Were the dividends of 1903 paid principally from 
the earnings between the dividend of 1902 and the time of the first 
dividend in 1903 ? 

Mr. Simmons. No; I think our dividends were always declared 
from the accumulated earnings. AYe had a large accumulation of 
earnings. 

Mr. Townsend. What effect did that last dividend of 4 per cent, in 
1903, have upon your accumulated earnings? 

Mr. Simmons. It decreased the accumulated earnings just so much. 

Mr. Townsend. Did you have any accumulated earnings left after 
that? 

Mr. Simmons. A large amount. 

Mr. Townsend. After the last payment? 

Mr. Simmons. Yes. 

Mr. Townsend. Can you tell how much ? 

Mr. Simmons. When do you want to know? What dividend do 
you refer to ? 

Mr. Townsend. I am referring to the dividends of 1903. There 
were practically but two dividends paid in 1903. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


23 


Mr. Simmons. In 1903 we had an accumulation of earnings of 
between four and five millions of dollars, out of which we paid the 
dividends. 

The Chairman. Let me ask a question right there on that point. 
You talk about accumulated earnings. You had some bonds issued 
by the company a long time ago to make a lump payment in lieu of 
the annual payments that were going to the Government of Colombia, 
did you not ? 

Mr. Simmons. Yes, sir. 

The Chairman. Was it not a part of the provision of the issuance 
of those bonds to set apart a sinking fund? When you speak of 
accumulated earnings do you speak of that ? 

Mr. Simmons. No. 

Mr. Drake. Those bonds represent a rental charge under the con¬ 
cession. 

Mr. Townsend. How much was that surplus? 

Mr. Simmons. Over four million dollars. 

Mr. Townsend. After the last dividend of 1903 was paid? 

Mr. Simmons. Yes. 

Mr. Townsend. Have you declared dividends since that time? 

Mr. Simmons. Yes. 

Mr. Townsend. When ? 

Mr. Simmons. The records will show. 

Mr. Deming. I can tell when it was paid, but I don’t know when it 
was declared. May 3, 1904, we paid a dividend of 2J per cent. 

Mr. Cromwell. The very last one was when? 

Mr. Deming. February 1,1905, 5 per cent. 

Mr. Esch. In that connection what was the Government’s share of 


the dividend ? 

Mr. Simmons. State the check that we gave. 

Mr. Deming. The check Avhich I remitted to Mr. Taft, the Secre¬ 
tary of War, for dividend on 68,887 shares, was $344,435; to J. G. 
Walker, as chairman of the Isthmian Canal Commission, for 94 shares, 
$470, and to each member of the seven Commissioners $5 ($35), mak¬ 
ing $344,940. 

Mr. Townsend. .Do your books show the total expense for operating 
the New York City office for the year 1903 ? 

Mr. Simmons. The books will show just what the expense was. 

Mr Drake. The expenses of the New York office for 1903 were 


$83,607. 9 

Mr. Townsend.. What items were included m that expense? 

Mr. Simmons. Read the items. 

Mr Dr ake. All items of general expense, such as covered by book 
accounts, numbered from 80 to 90, inclusive. I will call them oft: 
Account 80, advertising folders and posters; 81, general advertising; 
82 salaries of clerks; 83, directors and committee s fees; 84, repairs and 
rent of general offices; 85, other general office expenses; 86, exchange; 
87. legal services and expenses; 88, salaries of officers; 89, stationery 

and printing; 90, telegrams and cables. # . , ,, , 

Mr. Townsend. Item No. 84, for repairs and rent of the general 
offices, how much was that item in the year 1903 ? 

Mr. Drake. $3,600. x u D , 9 

Mr. Townsend. You don’t know about that, Air. President. 

Mr. Simmons. No, I do not. 


24 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Townsend. Now, Mr. Drake, what was the amount of item 
u No. 85, other general office expenses ? ” 

Mr. Drake. $2,415. 

Mr. Townsend. What did that include? 

The Chairman. Before you go into the books, I w T ould like to ask 
two or three questions. You say in your report of 1903 by the board 
of directors to the stockholders, on page 17, “ balance to the credit of 
profit-and-loss account, $4,991,929.91.” What is that item? 

Mr. Simmons. That is accumulated earnings, profits that we had 
made. 

The Chairman. Over and above- 

Mr. Simmons. Over and above dividends; it is the surplus profits. 

The Chairman. Over and above what you are required to set aside 
for a sinking fund and payment of interest ? 

Mr. Simmons. Profits above everything, subject to division among 
the stockholders in the shape of dividends. 

Mr. Cromwell. Accumulated mostly during the period from 1893 
to 1901, when no dividends were declared ? 

The Chairman. There was, then, during all those years, a fund 
available for distribution as dividends? That is what I wanted to 
get at. 

Mr. Cromwell. Here is a statement prepared by the treasurer 
showing the gross earnings, the expenses, and the net profits for the 
years 1896-1904; also a statement showing balances to credit of 
profit-and-loss account for same period. 

The Chairman. Can you give them to me? 

Mr. Cromwell. Yes, sir. 

The Chairman. We will put them in as Exhibits No. 6 and 6d. 

Exhibit 6. 

Statement of gross earnings, expenditures, and net earnings. 



Gross earn¬ 
ings. 

Expenses. 

Net earn¬ 
ings. 

1896... 

$2,271,141.51 
2,300,705.25 
2,142,881.17 
2,195,041.96 
2.655,194.71 
3,196,708.97 
2,762,815.63 
2,664,051.29 
2,861,353.67 

$1,725,456.98 
1,890,831.88 
1,876,134.44 
1,899.810.19 
2,208,430.03 
2,937,118.85 
2,467,431.23 
2,262,982.99 
2,300,037.72 

$545,684.53 

409.873.37 

266.746.73 

295,231.77 

446,764.68 

259,590.12 

295,384.40 

401,068.30 

561,315.95 

1897.-. 

1898... 

1899.... 

1900... 

1901... 

1902....... 

1903... 

1904 (11 months).. 



Exhibit 6. 

Statement showing balances to credit of profit and loss account. 


Date. 

Amount. 

Date. 

Amount. 

December 31,1896. 

$587,465.79 

2.713,920.70 

2,971,448.51 

3,390.398.94 

3,867,831.69 

December 31,1901 

$4,110,345.00 
4,201,587.09 
4,191,929.91 
a 4,578,245.86 

December 31,1897. 

i December 31.1902 

December 31.1898. 

December 31, 1903 

December 31,1899. 

November 30,1904 

December 31,1900. 




a Figures for 1904 are only for eleven months, and are arrived at by adding net profit for that 
period. It is impossible to give figures for year until completed returns come in from isthmus. 



































INVESTIGATION OF PANAMA RAILWAY COMPANY. 25 

Mr. Cromwell. It shows that although in some of those years the 
company did not pay dividends there were large earnings accumu¬ 
lated. 

The Chairman. When was the last time this company has issued 
any bonds? 

Mr. Cromwell. The company issued its 44 per cent mortgage bonds 
on August 16, 1897. 

The Chairman. How many ? 

Mr. Cromwell. The authorized issue was $4,000,000. 

The Chairman. How many of those in fact issued and placed? 
Has the company issued any bonds since that time? 

Mr. Cromwell. They were all issued under the mortgage, but the 
company has redeemed $981,000 and also owns in the treasury of the 
company to-day $647,000— leaving in the hands of the public only 
$2,372,000. 

The Chairman. How much of the proceeds arising from the sale of 
those bonds is involved in this balance credited to profit and loss? 

Mr. Cromwell. None whatever. 

The Chairman. Can you tell at this time why it was that bonds 
were issued when you had an available fund like this to your credit ? 

Mr. Cromwell. For this reason: There was, in 1897, an issue of 
bonds called the “ 7 per cent sterling mortgage issue,” which were 
maturing in that year. The balance upon this issue was $2,612,338. 
The new 4£ per cent first mortgage of 1897 was issued for the pur¬ 
pose of retiring this balance of these sterling mortgage bonds and of 
providing the company with sufficient moneys to complete the La 
Boca pier and basins, construction and reconstruction of steamships, 
then under way, and divers other permanent improvements. The 
proceeds of the new 44 per cent first-mortgage bonds were applied 
toward the redemption of the sterling mortgage bonds, and the com¬ 
pany applied out of its accumulated earnings $705,000 cash. Thus 
the sterling mortgage issue was paid off. 

The remainder ($2,000,000) of these 44 per cent first-mortgage 
bonds were issued under the mortgage to pay balance due for con¬ 
struction of the La Boca pier and basin (over $1,000,000) and for 
other improvements of the company. As I have said, the company 
has redeemed $981,000, and has now in its hands $647,000, leaving in 
the hands of the public $2,372,000. 

The Chairman. Have there been any bonds issued since that time? 

Mr. Cromwell. There were sold out of the treasury bonds $265,000 
in October, 1904, at a premium, viz, at 1044 per cent and interest. 

The Chairman. In 1904 you had some repairs made to the ships 
that belong to the company ? 

Mr. Cromwell. The statement I have just made respecting the out¬ 
standing issue of first-mortgage bonds is of this date. We then 
owned $913,000 of these bonds in the treasury of this company. 
These bonds were issued under the mortgage dated August 16. 1897, 
which provided that they should be issued for the purpose of com¬ 
pleting terminals, buildings, buying and reconstructing ships, and 
all other necessary improvements. Of course none of the bonds of 
the company have been issued for any current operating expenses. 
The bonds have onlv been issued to retire the sterling mortgage bonds 
and for the construction of the La Boca pier and port, and for 
reconstruction of ships and other like improvements, increasing the 


26 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


capital account of the company. In accordance with the purposes 
of the mortgage of 1897 the company undertook the reconstruction 
of two of its vessels. That improvement was of a permanent char¬ 
acter, the practical reconstruction of the vessels, and amounted to 
about $375,000. The improvement has been accomplished, the vessels 
have been reconstructed and are now in active operation, and the 
$375,000 has been paid by the company. 

The Chairman. Paid by the company out of what fund? 

Mr. Cromwell. From the proceeds of the $265,000 bonds of this 
issue and about $100,000 cash out of the treasury. The bonds were 
held in the treasury since 1897 for that very purpose. 

The Chairman. In that connection, Mr. Cromwell, why was that 
item paid out by the sale of these bonds when there was available 
cash in your accumulated earnings to have done that ? 

Mr. Cromwell. Because the improvement referred to was of a 
permanent character and related to capital account. These bonds 
were created for that purpose. Corporations generally have long¬ 
time bond issues to represent the permanent improvements of their 
property. 

Mr. Townsend. How do you redeem the 4J per cent first-mortgage 
bonds ? 

Mr. Cromwell. From our cash resources. 

The Chairman. At that time there were sufficient accumulated 
earnings to have paid that item and left something over? 

Mr. Cromwell. Yes, sir; but the accumulated earnings of the com¬ 
pany were represented in part bv various premanent improvements, 
and were not all in the form of cash assets in the treasury. 

The Chairman. You had accumulated earnings? 

Mr. Cromwell. Partly represented by cash in the treasury, but not 
entirely by cash. That, however, did not affect the status of the 
account itself. 

The Chairman. There are $4,191,929.91 of accumulated earnings. 
Was not there a sufficient amount of that available to pay for the 
repairs to the ships ? 

Mr. Cromwell. Oh, yes; certainly. 

The Chairman. That is the point. 

Mr Cromwell. Sufficient of that amount was in point of fact phys¬ 
ically available in cash, but not necessarily applicable to that purpose. 
The proper thing was to dispose of the bonds created for that purpose. 

The Chairman. To go further in debt rather than use the money 
you had ? 

Mr. Cromwell. Because the moneys in hand should first be used for 
the current operations of the company. 

The Chairman. Were they required for that purpose? 

Mr. Cromwell. Not in the sense of being absolutely necessary to 
conduct the business, but were properly so applicable. If corpora¬ 
tions took all of their net earnings to pay for reconstruction and per¬ 
manent improvement of their property there never would be any 
distribution to stockholders. 

The Chairman. You say that this item of $4,191,929.91 of accumu¬ 
lated earnings was not all in cash? 

Mr. Cromwell. It was not. 

The Chairman. Of what did that consist other than cash ? 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 27 

Mr. Cromwell. The treasurer lias made a-statement which may be 
of use to you in explanation both of the dividends and the disposition 
of the surplus fund, that is, the profit and loss account. 

The Chairman. Let me ask you this specific question: At the time 
of this last 4 per cent dividend, or at the December, 1903, directors* 
meeting, when they determined to pay that dividend, how much 
actual cash was then in this item of accumulated earnings? I want 
to know how much actual cash was involved in that item of accumu¬ 
lated earnings; in other v T ords, 1 want to analyze that item. 

Mr. Deming. On December 31, 1903, the treasurer’s balance sheet 
shows money, current assets, cash in bank, and with agents $469,994.66. 

Mr. Cromwell. How 7 many bonds in the treasury ? 

Mr. Deming. In the treasury 6 per cent Panama Railroad Com¬ 
pany sinking fund subsidy bonds $153,000. 

The Chairman. From what do you read? 

Mr. Deming. From the annual report, page 16; and 4| per cent,, 
twenty-year, gold sinking-fund bonds, $935,000. 

Mr. Cromw 7 ell. Then you had in hand $1,557,994 cash assets— 
$469,994.66 in cash and $1,088,000 in treasury bonds? 

The Chairman. Included in these cash assets were these bonds ? 

Mr. Cromw t ell. Yes, sir. 

The Chairman. Which w T ere really an indebtedness of the 
company ? 

Mr. Cromwell. Not until they were sold. They w r ould have 
been if sold; but in that case w 7 e would have had $1,088,000 in cash as 
the proceeds thereof and with which to meet the same when they 
matured. 

The Chairman. They never could be available for any use until 
they w 7 ere issued, and the moment they should be issued they would 
become an indebtedness against the company. Therefore, to make up 
the account of accumulated earnings they w T ould have to include this. 

Mr. Cromw 7 ell. No, sir; they are not a part of the accumulated 
earnings. The proceeds of the bonds, if sold, would have replaced 
the bonds sold. 

The Chairman. I want to get at the items that constitute that 
$4,000,000 of accumulated earnings. 

Mr. Deming. I have made a statement going back to 1896 showing 
the disposition of the accumulated earnings. 

The Chairman. What I want to get at is to have you state what, at 
the time this statement w 7 as issued, were the items that went to make 
up this $4,191,929.91, called the balance of “ profit and loss account? ’ 

Mr. Deming. I present a statement showing approximately the dis¬ 
position of surplus earnings over and above payment of dividends of 
the Panama Railroad Company included in balance to credit of profit 
and loss account, November 30, 1904. 

The Chairman. 1904; I want the item of 1903. 

JVXr. Cromwell. We will have to go back and make up one tor that. 

The Chairman. Well let us have this one, then. 


28 


INVESTIGATION OF PANAMA RAILWAY COMPANY 


Exhibit 6a. 


Statement showing, approximately, the disposition of surplus earnings, over and 
above payment of dividends, of the Panama Railroad Company, included in 
balance to credit of profit and loss account, November 30, 190 


Amount from voluntary sinking fund applied to redemption of 7 

per cent general mortgage bonds held by public_ 

693 7 per cent general mortgage bonds in voluntary sinking fund, 

canceled ___ 

Panama Railroad Company 6 per cent sinking-fund 
subsidy bonds in voluntary sinking fund turned 


into treasury_$312, 000. 00 

Less drawn for redemption_ 186, 000. 00 


Additions to property or capital expenditures since January 1,1897, 

paid for out of earnings (see 6b)_ 

Redemption of Panama Railroad Company 4^ per cent first mort¬ 
gage bonds_ 

Panama Railroad Company’s first mortgage 4| per cent bonds in 

treasury paid for out of earnings_ 

Cash on hand November 30, 3904_;_ 


$705, 088. 34 
693,, 000. 00 


126, 000. 00 

1, 278, 216. 84 

981, 000. 00 

21, 987. 50 
722, 304. 98 


4, 527, 597. 66 

Less amounts written off for worn-out equipment and adjustment 

of sundry accounts_ 341, 283. 59 


Approximate increase in profit and loss balance_4,186, 314. 07 


November 30, 1904. Balance to credit of profit and loss as per 

statement No. 1_ 4, 578, 245. 86 

Less balance December 31, 1896_ 587, 465. 79 


3, 990, 780. 07 


Exhibit 6b. 


Statement showing additions to property or capital expenditures paid for out of 

net earnings. 


1897. Installation of electric plants, providing new staterooms and 

other additions on steamers Allianca, Finance, and Ad¬ 
vance _ 

1898. New floating pile driver_ 

1901. Electric-light plant, Colon_ 

1901. Ice-making plant. Colon_ 

1901. Dredging attachment for floating pile driver_ 

1901-2. New tracks, Colon yard_ 

1901-2. Improvements to pier No. 2, Colon__ 


1901-2. 3 new coal lighters_ 

1897-1902. New terminal at La Boca_$2, 220, 357.13 

Less provided by disposal of bonds_ 1, 087, 000. 00 


1902. Filling lagoon north of pier 1, Colon_ 

1902. Tank at Pedro Miguel_ 

1904. 2 new lighters, to November 30_ 

1904. Duplicate ice plant to November 30___ 

1904. New “ Y ” at La Boca Junction to November 30_ 

1904. Installation of electric motor on steam cranes to November 
30_ 


$33, 513. 77 
7, 428. 03 
10, 055. 19 
6, 792. 70 
1, 083. 34 
12, 462. 48 
12, 313. 53 
36, 342. 40 


1,133, 357.13 
4,100. 73 
3,141. 48 
9, 901. 76 
3, 452.12 
2, 524. 27 

1, 747. 91 


Total 


1, 278, 216. 84 








































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


29 


Mr. Deming. Amount of voluntary sinking fund applied to re¬ 
demption of 7 per cent mortgage bonds held by public, $705,088.34. 
In other words, we reduced our mortgage indebtedness to that extent. 

The Chairman. Ilou reduced your bonded indebtedness bv what 
method? J 

Mr. Deming. By the retirement of 7 per cent sterling mortgage 
bonds. 

The Chairman. You mean you liquidated that many bonds that 
were outstanding? 

Mr. Cromwe LI j . O u t 0 f cash. 

The Chairman. Then you credit that- 

Mr. Deming. I took that up as one of the amounts because we had 
a voluntary sinking fund derived from accumulated earnings and 
represented by bonds purchased therewith as investments, and that 
entire amount was closed into the profit and loss account in 1897, 
and this shows what was done with that amount. 

The Chairman. Let us have your next item. 

Mr. Deming. $693,000 7 per cent sterling mortgage bonds, which 
were held in the same voluntary sinking fund, and which had been 
purchased with earnings. These were canceled out of earnings. 
That is, in addition to the $705,000. Then Panama Itailroad 6 per • 
cent sinking fund subsidy bonds held in the same voluntary sinking 
fund were turned into the treasury, $312,000—being bonds purchased 
with earnings. 

The Chairman. They were not canceled ? 

Mr. Deming. No, sir; they were not canceled because they had not 
matured as had the sterling bonds, and therefore were turned into the 
treasury of the company as treasury assets. 

The Chairman. Now, Mr. Cromwell, that item is included in the 
accumulated earnings fund. Was it the notion of the directors that 
that would be available to be distributed as dividends? 

Mr. Cromwell. Those bonds had been acquired with previous 
earnings, and in equity, as between the stockholder and the corpora¬ 
tion, constituted a dividend fund and could have been sold, if desired, 
to replace the cash used for their purchase. 

The Chairman. You took up previous earnings of the company 
and bought bonds ? 

Mr. Cromwell. Yes, sir. 

The Chairman. Is it then indebtedness? 

Mr. Deming. It is not indebtedness any more than the ownership 
of Government bonds would be an indebtedness, for these bonds were 
purchased with cash earnings as an investment. There was no obli¬ 
gation to purchase them. 

The Chairman. It is a debt that the company owed. 

Mr. Drake. These subsidy bonds so purchased were capitalization 
or indemnity of the subsidy under the concession from the Republic 
of Colombia. 

The Chairman. Those bonds were bonds of the company. 

Mr. Cromwell. Yes; bonds of the company, but only payable in a 
specified manner and amount. They were not for money received or 
borrowed, and were only issued to represent the annual payment of 
$225,000 payable to Colombia, as it matured each year successively. 

Mr. Townsend. They became an obligation of your company which 
eventually you have to take care of. 


30 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Deming. Concerning the $312,000 bonds which were turned 
into the treasury, there have since been $186,000 drawn for redemp¬ 
tion, leaving $126,000 still in the treasury. That amount only do I 
now carry in as part of the accumulated earnings fund. 

The Chairman. That is in the item of accumulated earnings ? 

Mr. Cromwell. Not the original $312,000, only $126,000. 

The Chairman. Now let us have the next item. 

Mr. Deming. Additions to property or capital expenditures since 
January 1,1897, paid for out of earnings, $1,278,216.84. 

The Chairman. It is not necessary to go into the subschedule, 
Exhibit 6b. It is the general item of physical properties that have 
been added to the original property by the earnings of the company 
that goes into this item of accumulated earnings available for the pay¬ 
ment of dividends. 

Mr. Cromwell. It is a subdivision of the Exhibit 6a statement. 

The Chairman. I wanted to get at how these dividends were 
declared. 

Mr. Deming. The next item is redemption of Panama Kailroacl 
Company 4r| per cent first mortgage bonds, $981,000. 

The Chairman. Were they liquidated or purchased ? 

. Mr. Deming. They were purchased by the trustees of the mortgage 
and canceled at the rate of $140,000 a year, or about that sum. The 
mortgage calls for the payment by the railroad company of $150,000 
cash on the 1st of August of each year to the trustees of the mortgage 
for this purpose. 

The Chairman. You mean that became a portion of the accumu¬ 
lated earnings in the treasury ? 

Mr. Cromwell. Because they took cash out of the earnings and 
paid for and canceled $981,000 of these bonds. 

The Chairman. In that connection, what has become of that cash ? 

Mr. Cromwell. It was paid to those who sold us the bonds. 

The Chairman. That is not in the treasury ? 

Mr. Cromwell. No, sir; the bonds themselves have been canceled, 
reducing the mortgage indebtedness of the company to that extent 
and increasing the equity in the property to that extent. 

Mr. Townsend. How could you use that $981,000 in the payment of 
a dividend ? 

Mr. Cromwell. How could we ? 

Mr. Townsend. Yes. 

The Chairman. Which consists of mere book charges. 

Mr. Townsend. How could that be made payable for dividend? 
You do not claim that you could draw on that to pay a dividend? 

Mr. Cromwell. No, sir. In fact we did not, and could not use as 
dividends moneys which we had already expended for redemption of 
these $981,000 of bonds. The distribution of any dividend as between 
the stockholders and the corporation was confined to the $4,000,000 
fund. It would all have actually remained in the treasury were it 
not for the investments which Mr. Deming is stating. Of this, part 
was for redemption of the Sterling mortgage bonds; part for La Boca 
terminals; part for reconstruction of ships; part for other improve¬ 
ments set forth in the statement. 

Mr. Townsend. Then the answer that $4,191,929.91 could be used 
for purposes of paying dividends is not exactly correct so far as that 
item of $981,000 is concerned? 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


31 


Mr. Cromwell. I think it is absolutely correct. In a legal sense 
the fund itself exists without regard to the presence or nonpres¬ 
ence of the cash, and the corporation remains accountable to the stock¬ 
holders for the fund. 

Mr. Townsend. Would you have attempted to pay dividends out 
of anything excepting a surplus ? 

Mr. Cromwell. This is in the surplus, although in the form of 
property acquired or equity increased by reduction of mortgage 
debt. Any bookkeepr will tell us that the surplus is the net accumu¬ 
lated earnings of the company—no matter how it may happen to be 
invested or held—whether in cash, in securities, in improvements, or 
enhanced equity. 

Mr. Townsend. Over and above liabilities? 

Mr. Cromwell. Yes, sir. The fund as such exists. It may not at 
the moment be convenient to distribute it in cash. You might, for 
instance, make a stock dividend instead. You might also, instead, 
make a debenture dividend as is sometimes done; but the legal rela¬ 
tions of the parties to the accumulated earnings remain unchanged 
by the manner of its investment. It may not be liquid, but that is of 
no legal consequence. 

Mr. Deming. The next items are: The Panama Railroad Com¬ 
pany’s first mortgage 4J per cent bonds in treasury paid for out of 
earnings, $21,987.50; cash on hand November 30, 1904, $722,304.98. 
These items together make a total of $4,527,597.66. Less amount 
written off for worn-out equipment and adjustment of sundry ac¬ 
counts, $341,283.59, leaving profit and loss balance since January 1, 
1897, of $4,186,314.07, which, without enumeration of trifling items, 
makes the equivalent of the $4,191,929.91. 

The Chairman. What I wanted to do was to analyze the item of 
the profit and loss account that you have—that four million and odd 
thousands of dollars. 

Mr. Cromwell. Mr. Deming has done so. Those things can only 
be done by close approximation on such short notice. 

The Chairman. There is no means to find exactly and accurately 
what they are. 

Mr. Drake. Not until the year closes. 

The Chairman. At the close of the last year. Who is com¬ 
petent here to make up for us an analysis of that item of profits 
and loss for the year 1903? 

Mr. Cromwell. Mr. Deming, the same gentleman who prepared 
this. 

The Chairman. Well, Mr. Deming, make that up and forward it 
to me at Washington. I will be obliged to you if you do that. 

Mr. Simmons. We will have that done. You want an exact 
statement ? 

The Chairman. I want the treasurer, if he is the proper person to 
do it, to make a complete and accurate analysis of the item on page 
17 of the annual report for the year 1903 of the board of directors 
to the stockholders. There is an item there: “ Balance to the credit 
of profit and loss, $4,191,991.91,” and in this analysis that is to be 
made I would be glad to have incorporated the amounts of cash on 
hand at that time and the source from whence that cash has been 
derived. 

Mr. Cromwell. All right. 


32 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Townsend. I wish, Mr. Chairman, you would add that we 
would like a similar statement for the same items for December 31, 
1902, making up the item of $4,201,587.09, as the balance to the 
credit of the profit and loss account. 

Mr. Cromwell. That can be done. 

The Chairman. As soon as that is done, forward to me as chairman 
of the subcommittee at Washington. 

Mr. Simmons. Would you not like, Mr. Chairman, for us to give 
you a little further explanation as to the various items that con¬ 
stitute, as he says, approximately, the amount of the $4,000,000 fund ? 

The Chairman. I was going to pass to that now. 

Mr. Simmons. That will aid you in comprehending it when you 
come to get the statement. 

The Chairman. In an approximate way, I should like to know 
what this cash item of $409,994.66 included in the current assets 
on page 16 of the fifty-third annual report for 1902, “ Cash in banks 
and with agents.” I would like to know where you got that cash; 
what did it represent? 

Mr. Deming. It represented the receipts of the company from 
various sources. It may have included amounts of our connecting 
steamship lines. 

Mr. Townsend. Did it ? 

Mr. Deming. It undoubtedly did, because those accounts are always 
in process of settlement. 

Mr. Cromwell. Like bills receivable; current assets. 

The Chairman. Is there anything included in this cash item to 
which I have referred other than the money that came to the company 
as its earnings as carrier for transportation of passengers and freight ? 

Mr. Deming. No, sir. 

The Chairman. This cash item of $469,994.06 says, “ cash in bank 
and with agents.” Now, was any of that cash derived from any other 
source than the transportation of freight and passengers? 

Mr. Lovering. Was there anything from the sale of material? 

The Chairman. Anything other than transportation? 

Mr. Deming. Yes, sir. We have our regular supply department on 
the Isthmus, you know, on the railroad, and we do buy and sell sup¬ 
plies—coal and material—we sell coal to the United States Govern¬ 
ment and to our connecting steamship lines at the Isthmus. 

The Chairman. In addition to the carrying business you are 
dealers in coal and other supplies? 

Mr. Deming. To a certain extent; yes, sir. 

The Chairman. So part of this cash was derived from profits on 
that commerce ? 

Mr. Cromwell. Also amounts due from the Government. If the 
Government owed us $50,000, that was as good as cash. I want that 
question answered, Mr. Deming. 

The Chairman. I want to know if there was included in this item 
of cash anything other than the revenues derived from the conveying 
of freight and passengers and profits received from coal or other 
commerce you might have bought and sold. 

Mr. Deming. For freight, passengers, mails; to the best of my 
knowledge, that was all. 

The Chairman. Does that cash represent any revenues derived 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 33 

from placing any bonds of the company at any time or under any 
circumstances ? 

Mr. Deming. We did not sell any bonds during the year 1903. 

The Chairman. None of that cash was brought down from previ¬ 
ous years ? 

Mr. Deming. Certainly. 

The Chairman. Was there any portion of that item of cash that 
had resulted from the sale of bonds of the company or any other man¬ 
ner of indebtedness on the part of the company ? 

Mr. Cromwell. In other words, is any of that item represented by 
anything that the company is indebted for, directly or indirectly? 

Mr. Deming. Undoubtedly there was some of it that came from the 
proceeds of the sale of bonds. 

The Chairman. Can you say how much? 

Mr. Deming. Without looking into it more closety I can not; but 
w r e sold 1,087 bonds—-that is, $1,087,000—of our 44 per cent bonds for 
account of the La Boca wharf; that is, to make a payment for balance 
of indebtedness incurred on account of the La Boca wharf. Now, 
there was in that sale an amount of about $119,000 in excess of what 
we had to pay to the contractor. 

The, Chairman. Now, that is included in this item—that excess of 
$119,000? 

Mr. Deming. Undoubtedly; but as we had to - 

The Chairman. I don't care for the reasons; I want to know the 
facts. What other similar source was any of that cash derived from; 
what other indebtedness of the company or sale of its bonds ? 

Mr. Deming. No other. 

The Chairman. When was that excess of those bonds put into that 
account ? 

Mr. Deming. I can get it in one moment. 

The Chairman. I would like to know when that was credited up to 
the cash, that excess. 

Mr. Deming. Those bonds were sold in 1902. 

The Chairman. Now, what is the exact amount of the excess, if you 
have it there, over and above the amount paid to the contractor ? 

Mr. Deming. I should have to go to our books for that. 

The Chairman. It was something over $100,000, was it not? 

Mr. Deming. About $119,000. 

The Chairman. This excess is carried in this item of cash with 
agents and banks. Now, after declaring this dividend- 

Mr. Cromwell. Mr. Chairman, would you mind letting Mr. Dem¬ 
ing complete his statement ? 

The Chairman. Yes. 

Mr. Deming. We had expended on new terminals at La Boca 
$2,220,357.13, and we provided for a portion of it by the sale of those 
1,087 bonds. That is, we provided $1,087,000, leaving still uncapital¬ 
ized an amount paid out of the accumulated earnings of $1,133,357.13. 

Mr. Cromwell. And this $119,000 excess proceeds of bonds is ap¬ 
plied in reimbursing to that extent of that sum expended on the La 
Boca improvements of earnings. It reimbursed earnings account to 
extent of $119,000. 

The Chairman. The theory, as I understand it, upon wdiich you 
have carried this four million fund is whenever you purchase any- 


PAN RY— 05-3 




34 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


thing that becomes a material and permanent part of the road that is 
to be charged against the road, credited to accumulated earnings. 
That is the theory upon which this item has been built ? 

Mr. Cromwell. That is the practice of railroads and corporations 
the world over. I mean to say that we are not pursuing an unusual 
practice : but it is the general practice in corporate accounting. 

The Chairman. T want to recur to that item of improvement to 
those ships. 

Mr. Townsend. T wanted to determine that in connection with the 
answers that you, Mr. Deming, and Mr. Cromwell have made that that 
$4,191,929.91 was available for the payment of dividends. I wanted 
to get at how that was possible if you are going to make a statement 
of the items that make up that general sum of $4,000,000 in 1903, and 
also a similar item in 1902. 

Mr. Deming. Possibly, because the items that go to make up that 
fund extend back over a period of years. On the 1st of January, 
1897- 

The Chairman. That is one of the main things I want; a complete 
and accurate analysis of that item. * 

Mr. Deming. We will give you as accurate an analysis as our books 
will allow us to do. 

Mr. Townsend. Can you tell this, Mr. Deming; how much more 
money available for the payment of dividends you had in the treasury 
at the time your last 4 per cent dividend was declared in 1903 than 
you had at the same date, same time of year, in 1900? Would it be 
possible for you to find that ? 

Mr. Deming. Mere cash in hand does not represent an amount that 
is applicable to the payment of dividends. 

Mr. Townsend. As much in 1903 as in 1900 ? 

Mr. Deming. Yes, sir. 1 

Mr. Townsend. As much in 1900 as in 1903? 

Mr. Deming. Yes, sir. 

Mr. Townsend. Then you can make that comparison for us, can 
you not? 

Mr. Deming. I will make the attempt. 

The Chairman. Do not these annual reports make that now? 

Mr. Cromwell. Yes, I think they do. 

Mr. Townsend. You have not changed your method of bookkeep¬ 
ing—you had not—at the time of the last 4 per cent dividend in 
1903, from wliat it had been theretofore from 1893 to 1901 ? 

Mr. Deming. No, sir; we made a change in our method of book¬ 
keeping in 1896. 

Mr. Townsend. But after that there was no change in keeping 
your account at all ? 

Mr. Deming. None whatever. 

Mr. Townsend. And has not been up to date? 

Mr. Deming. No, sir. 

Mr. Lovering. Has that balance of assets been a constantly increas¬ 
ing one from year to year? 

Mr. Deming. Yes, sir. 

Mr. Townsend. Does that balance—I now refer to the item on 
page 17 of your report of 1903 to the stockholders—of $4,191,929.91 
represent all of the assets of the company over and above its liabili¬ 
ties at that time? 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


35 


Mr. Deming. Yes, sir. 

Mr. Townsend. Does it include any part of the ships, or all of 
them? 

Mr. Deming. It is over and above the ships as part of the assets. 

Mr. Townsend. All of them? 

Mr. Deming. Yes, sir; the three ships which the company owns. 

Mr. Townsend. So that there is no item that is considered as an 
asset, either of the ships or the railroad, that is not included in that 
item on the date of December 31, 1903? 

Mr. Cromwell. You do not mean included in the item of $4,191,- 
929.91 itself, but included in the account of which that item is the 
balance ? 

Mr. Townsend. As I sav, the balance over and above. 

Mr. Cromwell. All the property of the company, without excep¬ 
tion? 

Mr. Deming. That represents the surplus. 

Mr. Cromwell. Over and above all the property, without excep¬ 
tion? 

Mr. Deming. Of the property—we have that other property- 

Mr. Townsend. What other property do you refer to, Mr. Deming? 

Mr. Deming. We have our liabilities, assets and liabilities, and 
over and above that there is an amount of $4,191,929.91. 

Mr. Townsend. That is the way I understand that; that represents 
the balance. 

Mr. Cromwell. That is right, sir. 

The Chairman. As treasurer, you have charge of the books show¬ 
ing all moneys received by the company, and from whom they were 
received ? 

Mr. Deming. Yes, sir. 

The Chairman. Do the books show a payment to this company of 
any money by any connecting steamship lines? 

Mr. Deming. Yes, sir. 

The Chairman. What lines? 

Mr. Deming. The lines which- 

The Chairman. I will ask you more specifically; what lines on the 
Pacific side? 

Mr. Deming. The Pacific Mail Steamship Company, the Pacific 
Steam Navigation Company, and the South American Steamship 
Company. 

The Chairman. Do your books show the receipt of any money by 
the Panama Kailroad Company from any other railroad company ? 

Mr. Deming. No, sir; no other railroad company. 

The Chairman. No money received from any source of that sort? 

Air. Deming. No, sir. 

Air. Lovering. Is there any money received from any other source 
than in the regular course of business? 

Mr. Deming. No, sir. 

Air. Lovering. No subsidy? 

Mr. Demtng. No, sir. 

Mr. Townsend. Have you any contracts with any other railroad 
company in regard to the handling of trade ? 

Mr. Deming. We have not; but I think that is a question that Mr. 
Cromwell or Air. Drake could answer. 

Air. Cromwell. The company has no contract, arrangement, under¬ 
standing, division, or transaction with any other railroad company 




36 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


in the world, directly or indirectly, remotely or contingently. I am 
glad that I could answer that myself. You know we have the con¬ 
tract with the Pacific Mail. 

The Chairman. Have you at hand a copy of the contract that 
exists between the Panama Railroad Company and the Pacific Mail 
Steamship Company? 

Mr. Cromwell. Yes, sir; I drew it. It is in the form of two con¬ 
tracts. Here they are. 

The Chairman. Mark these “ Exhibit No. 7 ” and '* 7a. 

Exhibit 7. 

“ The Panama Route.” 

CONTRACT BETWEEN THE PANAMA RAILROAD COMPANY AND THE PACIFIC MAIL 

STEAMSHIP COMPANY. 

[Dated June 11, 1902.] 

This agreement, made this eleventh day of June, 1902, in the year one thou¬ 
sand nine hundred and two, between the Panama Railroad Company, duly 
chartered and organized under the laws of the State of New York, and herein¬ 
after called the railroad company, party of the first part, and the Pacific Mail 
Steamship Company, also duly chartered and organized under the laws of the 
said State, and hereinafter called the steamship company, party of the second 
part witnessetli: 

Whereas the said railroad company is now operating its railroad across the 
Isthmus of Panama, and running a line of steamers from New York to Colon on 
the Atlantic Ocean ; and 

Whereas the said steamship company is now running a regular line of steam¬ 
ers on the Pacific Ocean between San Francisco and Panama and intermediate 
ports on the Central American and Mexican coast; and 

Whereas both companies are interested in and desirous of hereby establishing 
conditions under which they may carry on regularly and without interruption 
the business of transportation between San Francisco and New York and the 
said intermediate ports, with the intent hereby declared by both parties to 
develop to the fullest possible extent traffic by the Isthmus of Panama and to 
prevent the diversion of the business of said isthmus to other routes; 

Now, therefore, in consideration of these premises and with the intention of 
so securing to both of the parties hereto the advantages of a contract of the gen¬ 
eral character above set forth for a term of years, and in consideration of the 
sum of one dollar by each of the parties hereto to the other paid before the 
delivery hereof, it is mutually covenanted and agreed by and between the 
respective parties hereto, and their respective successors, assigns, and legal 
representatives, as follows, that is to say: 

Article I. 

/The railroad company hereby concedes to the steamship company (so far as 
its charter and its contract with the Colombian Government permit) the exclu¬ 
sive privilege of through billing to and from any and all ports of Central 
America, Mexico, the United States, and British Columbia, on the Pacific 
Ocean, under and during the life of this contract as hereinafter provided, in 
connection with the railroad company and each and every one of its Atlantic 
connecting lines. 

During the pendency of this contract the steamship company, when taking on 
its vessels for shipment at San Francisco or at any Pacific coast port situated 
between San Francisco and Panama, merchandise destined to Atlantic or Gulf 
ports of the United States, or to European points, shall issue its through bills on 
such merchandise only via the Isthmus of Panama. 

At New York and San Francisco business transported, or to be transported, 
by the Panama route is to be delivered to and received from connecting lines! 
the rates on such business so delivered to or received from connecting lines to 
be made by adding to the charges of such connecting lines and all transfer 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 37 

charges the rates prescribed under this agreement for transportation between 
New York and San Francisco. 

And both partie agree, respectively (within the scope of their powers and as 
far as they can consistently with their own safety and protection and with their 
duties as common carriers), to cooperate with each other in making such rates 
and in generally taking such measures as will afford to both parties protection 
against interference or competition by other steamship lines with the traffic 
hereby conceded by each to the other. 

Article II. 

Section “ A ."—There shall be maintained by the steamship company a 
through line of steamers each way between Panama and San Francisco, and 
such intermediate ports at which the steamship company now calls, as well as 
any other intermediate ports on the Pacific coast as above recited whose traffic 
shall develop sufficiently to warrant making them ports of call. The steamship 
company shall, subject to the perils of the seas, make at least three trips each 
way per month between Panama and San Francisco, and the steamers shall be 
those now running on the steamship company’s line between said ports, or others 
of approximately equal capacity and speed. In case any of the steamers en¬ 
gaged in the above service be lost or destroyed, the steamship company agrees 
to promptly replace such lost or disabled vessel or vessels by another or others 
of approximately equal capacity and speed, so far as necessary to maintain the 
service as above prescribed, namely, a through line of steamers between Panama 
and San Francisco and the intermediate ports as aforesaid, and the three trips 
each way per month as aforesaid by said present steamers or others of approxi¬ 
mately equal capacity and speed. 

Section “ B.”—The railroad company shall maintain a line of steamers each 
way between New York and Colon, and it shall, subject to the perils of the sea, 
make at least three trips each way per month between New York and Colon, and 
the steamers shall be those now running on the railroad company’s line between 
said ports, or others of approximately equal capacity and speed. In case any 
of the steamers engaged in the above service be lost or destroyed, the railroad 
company agrees promptly to replace such lost or disabled vessel or vessels by 
another or others of aproximately equal capacity and speed, so far as necessary 
to maintain the service as above prescribed, namely, a through line of steamers 
between New York and Colon as aforesaid, and the three trips each way per 
month as aforesaid by said present steamers or others of approximately equal 
capacity and speed. 

Section “ C ."—These two steamship lines, connecting respectively at Panama 
and Colon with the Panama railroad shall constitute, with said railroad, what 
shall be hereafter called the “ Panama Route,” between New York and San 
Francisco. 

Article III. 

The intention and purpose of this agreement being to obtain for the said 
“ Panama Route ” all the freight business that can be secured at reasonable 
and remunerative rates, it is agreed that either party to this agreement shall, 
at the request of the other party thereto, publish and make operative such 
through rates between New York and San Francisco as will compete with those 
made operative by the competing transcontinental railroad lines; and failure 
to comply with such request within twenty days from the date of its receipt 
shall constitute a violation of this contract and subject the offending party to 
the provisions of Article XIX of this contract. 

Both parties, however, agree that whenever either party without request 
from the other puts in operation on east or west bound traffic between San Fran¬ 
cisco and New York, or requests the other to put in operation on such traffic, 
a through rate of less than forty cents (40c.) per hundred pounds or ten cents 
(10c.) per cubic foot, then the party so putting into effect such rate, without 
request from the other or the party making such request, agrees to bear itself 
whatever difference there may be between the minimum rate above stated and 
the rate so put in operation, or requested, below such minimum rate. 

Article IV. 

During the term of this contract the railroad company shall not, directly or 
indirectly, run any steamers on the Pacific north of Panama, and shall (in so 
far as its charter and its contract with the Colombian Government may permit, 


38 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


and so far as it can consistently with its own safety and protection under exist¬ 
ing treaty stipulations) in every manner lawfully and reasonably within its 
power promote and protect the interests of the steamship company in all traffic 
north of Panama in connection with said railroad and its Atlantic connecting 
lines, and especially against all forms of competition whatsoever, and will (so far 
as it is practicable) give, turn over to, and direct to the vessels of the steamship- 
company, to the extent that it can lawfully control or influence the same, all 
business destined to Pacific points north of Panama originating on the Isthmus 
of Panama and carried upon its railroad or which may be brought to said 
isthmus by its own ships or by other ships or lines, and especially will not, so 
long as the steamship company faithfully performs the stipulations of this 
agreement, become interested in or divide with any other person or persons or 
corporation or corporations the earnings of a through line or any through 
business to or from points on the Pacific coast north of Panama, and upon all 
such through business the full local tariff rates for the time being in force for 
transportation across the Isthmus of Panama shall be charged to all competing 
lines, and the railroad company will pay to the steamship company the amount 
of the share of the through rate to which the steamship company would have 
been entitled if such through business had been carried over its line. 

Further, the parties hereto, each for itself, agree that all freight, passengers, 
baggage, specie and mail matter confided to either for transportation or 
brought by the one party to the other for the purpose of being conveyed in either 
direction over and upon the whole or any part of said Panama route shall be 
transported and carried promptly and without undue delay. 

During the pendency of this contract the steamship company binds itself not 
to run vessels directly or indirectly from* any port on the eastern shore of the 
North American Continent to Colon or to the eastern terminal of any of the 
transcontinental routes. 

The steamship company agrees during the pendency of this contract (in so far 
as its charter may permit and so far as it can consistently with its own safety 
and protection under existing treaty stipulations) in every manner lawfully 
and reasonably within its power to promote and protect the interests of the 
railroad company in the traffic of the Panama route, and especially against all 
forms of competition whatsoever: the steamship company further agrees dur¬ 
ing the pendency of this contract not to divert from the Panama route the 
traffic to or from any of the Pacific ports between San Francisco and Panama, 
originating at or destined to Atlantic or Gulf ports of the United States or 
European ports. And for such business the steamship company shall not enter 
into contracts of any kind involving through billing with any person, party, or 
corporation other than the Panama Railroad Company, nor shall the steamship 
company compete directly or indirectly (by reduced rates or otherwise) with 
the “ Panama route ” on said business, and on any business so diverted directly 
or indirectly by it the steamship company shall pay to the railroad company 
the freight it would have been entitled to receive if such business had been car¬ 
ried across the isthmus on its railroad. 


Article V. 

It is agreed that through freight rates so far as the same accrue to the rail¬ 
road company and steamship company shall be divided between them as 
follows: 

On freight between United States Atlantic coast ports and United States 
Pacific coast ports ; to the railroad company, fifty per cent (50%) ; to the steam¬ 
ship company, fifty per cent (50%) ; minimum rate, forty cents (40c.) per 
hundred pounds or ten cents (10c.) per cubic foot. 

On freight between United States Atlantic coast ports and Mexican or Cen¬ 
tral American ports; to the railroad company, sixty per cent (60%) ; to the 
steamship company, forty per cent (40%) ; minimum rate to or from Mexican 
ports, sixty cents (60c.) per hundred pounds, or thirty cents (30c.) per cubic 
foot ship’s option; minimum rate to or from Central American ports, fifty 
cents (50c.) per hundred pounds, or twenty-five cents (25c.) per cubic foot 
ship's option. 

On foreign freight between European ports and Mexican or Central American 
ports: To the railroad company, forty per cent (40%) ; to the steamship com¬ 
pany. sixty per cent (60%) ; minimum rate, thirty-five shillings (35/) per ton of 
twenty-two hundred and forty (2,240) pounds, or forty (40) cubic feet. 


39 


IN\ ESTIMATION OF PANAMA RAILWAY COMPANY. 

mwtl i ?h^ re - i . ght , between Eur °l )0an P orts ima United States Pacific coast 
ports lo the lailroad company, thirty-seven and one-half per cent (37*%) ; to 

t\\Ttv cpnt« 1 VjOn°^ n ^ >ini, Too 1X '^ V '^'i VO and one ‘ half l )er cont (62*%) ; minimum rate, 
toitj cents (40c.) per 100 pounds, or ten cents (10c.) per cubic toot 

I lie above-prescribed division between tlie railroad and steamship company 

n i .i fi' , f "« r ! °P he Hlr0l| 8l> t '-eight rates accruing to said companies 

Oil business and traffic, whether originating at or distilled to the ports above men- 
tioned or points prior or subsequent thereto. 

Subject to above agreed minima, the freight rates between United States 
Atlantic and I mted States Pacific coast ports, and between United States Atlan¬ 
ta coast ports and Mexican or Central American ports, and between Mexican, 
( entral American, or I mted States Pacific coast ports and European ports, are to 
be fixed by the initial carriers. All tariffs naming rates and commodities are to 
be made by mutual consent and become effective with the date of this agreement. 

II is fuitliei agreed that if, during the pendency of this contract, it becomes 
necessary,on account of quarantine or revolutions, or the acts of any government, 
to hold and warehouse freight, mail, specie, etc., at any point on the railroad or 
steamship company s lines, all charges thereon are to be considered as line 
charges, and are to be pro rated between the lines in interest according to the 
divisions of the through rates, it being understood that the charges for handling 
and warehousing by the railroad or steamship company are to be at cost. 

Article VI. 


It is mutually agreed that the term “ton.” as used in this agreement,shall mean 
two thousand two hundred and forty (2,240) pounds avdp., or forty (40) cubic 
feet measurement when so taken by ships, unless otherwise expressly provided 
herein. 


Article VII. 

Passenger rates accruing to the railroad and steamship company between 
New York and Pacific coast ports, Panama to San Francisco, both included, shall 
be divided as follows: To the railroad company, fifty per cent (50%) ; to the 
steamship company, fifty per cent (50%). 

Through passenger rates effective under terms of this contract are those which 
were in effect December 1, 1899, and any change therefrom is to be made only by 
mutual consent in writing; but either party to this contract is at liberty to 
diminish any agreed rate, but at its own cost, by the amount of the proportion 
accruing to it under the above divisions. 

Any commissions paid agents for soliciting and obtaining passenger business 
covering service of Panama route are to be divided between the railroad company 
and the steamship company pro rata, according to the divisions of the through 
rate. 

Both parties shall have the right to appoint and maintain agents at any point 
they may select. 

Article VIII. 

The steamers of the Pacific Mail Steamship Company shall make use of the 
La Boca wharf provided by the Panama Railroad Company whenever in the 
judgment of the Pacific Mail Steamship Company it is safe and prudent so to 
do; but in the event of the steamers not being able to get alongside said wharf 
without delay, then the cargo, etc,, shall be lightered in the Bay of Panama. 

When steamers load or discharge alongside La Boca wharf no charge shall be 
made on passengers, mails, specie, baggage, etc., but the railroad company shall 
be paid as wharfage on all other cargo (when same is taken from or landed on 
the wharf direct) a maximum rate of eighty cents (80c.) American gold per ton, 
it being understood that the railroad company is to provide at its wharf at La 
Boca the necessary equipment for the efficient operation thereof and for the 
prompt loading and unloading by the steamship company of its vessels, com¬ 
pensation for all which is included in above wharfage. 

If the railroad company furnishes cranes, there shall be an additional charge 
of ten cents (10c.) per ton on cargo for the use of such cranes, such usage, however, 
of cranes being optional with the steamship company. 

When lighterage is performed by the railroad company and the lighters are 
loaded or discharged at La Boca, no charge other than the lighterage charged is 


40 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


to be made the steamship company for the use of La Boca wharf or cranes, 
or loading or unloading the lighters at the wharf. 

If the steamship company elects to enter service between Panama and Chiriqui, 
such service is to form part of this contract, and the steamship company is to 
have the right to land all cattle it may carry on the beach at Panama free of any 
charge. 

Article IX. 

The railroad company shall, during the pendency of this contract, continue to 
employ its lighters when reasonably necessary to connect with the steamship 
company’s vessels and the shore at Panama, the railroad company agreeing to 
furnish lighters in sufficient number to load and unload such vessels with 
dispatch. 

When lighters are used the following shall be the lighterage charges: For 
each ton of freight delivered by the steamship company to the railroad company, 
or by the railroad company to the steamship company, ninety cents (90c.) per 
ton United States currency; for all specie or treasure, one-fortieth of one per 
cent (1/40%) ; for each passenger one dollar ($1.00) United States currency; 
no charge for extra baggage or mails. 

Panama local cargo to be received and delivered by the party of the first part 
as agent for the party of the second part, in that city; the receipt or delivery 
thereof and transfer to and from steamer, including the lighterage, wharfage, 
and cranage, to be performed by party of the first part, and party of the 
second part will pay for such services rendered $1.25 per ton, whether lightered 
or received from or delivered to steamers at La Boca. 

Article X. 

The railroad company agrees to transport from Colon to Panama supplies, 
excepting coal, exclusively for the use of the steamship company’s steamers on 
the Pacific at three dollars ($h) per ton, and to lighter same at Panama at one 
dollar ($1) per ton additional, it being hereby agreed that the steamship com¬ 
pany shall have the right to perform lighterage on its own coal and other sup¬ 
plies in its own lighters. 

The railroad company agrees to transport by each steamer from New York to 
Colon, supplies exclusively for the use of the steamship company, at the rate of 
$5 per ton. 

Article XI. 

The officers and employees of the steamship company shall be carried between 
Panama and Colon free, and between New York and Panama or Colon at the 
rate of ten dollars for each passenger. 

The officers and employees of the railroad company shall be carried between 
Panama and San Francisco at the rate of twenty dollars for each passenger. 

Article XII. 

The railroad company agrees, so long as its wires are in working order, to 
obtain and furnish the steamship company all telegraphic and telephonic infor¬ 
mation through its agents that may be necessary to properly conduct the busi¬ 
ness of the Panama route. 


Article XIII. 

Each party hereto shall be responsible for cargo, specie, and mail while under 
its care and until delivered to its cocarrier. 

Any responsibility accruing in regard to passengers or their baggage is to be 
assumed in like manner as cargo. 

Whenever any loss or injury occurs, or damage from delay in transportation, 
the loss or injury or damage from delay, whether accruing with respect to cargo, 
specie, mail, passengers or their baggage, shall, when same can not be located, 
be prorated between the railroad company and the steamship company, accord¬ 
ing-to the divisions of the through rate that may apply in each case. 

In case any actions, suits, or claims shall be brought against any cocarrier, the 
carrier responsible, as above stipulated, shall bear and discharge any loss, dam¬ 
age, or expense incident thereto; provided the carrier sued shall at once give 
notice to the other cocarrier to the end that each may have opportunity to 
defend its interests. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


41 


Article XIV. 

The carriage or transportation of salt. coal, and grain (except barley in bags 
between United States points) is hereby exempted from the operation of this 
contract, and each of the contracting parties reserves its full liberty as to the 
carriage or transportation of these articles. 

% * 

Article XV. 

The railroad company will do Ht its shops in Panama and Colon such work 
and repairs for the steamship company as the steamship company from time to 
time may request, and as the railroad company can perform without interfer¬ 
ence with its own business, charging therefor the cost of labor and material 
on the Isthmus, with ten per cent added thereto. 

« 

Article XVI. 

* 

The steamship company shall make over and deliver to the railroad company 
charter-parties of even date with the present instrument, at the nominal rate of 
one dollar per month, and unconditional in terms of the following steamers 
belonging to said company, and now running or to be run between Panama and 
San Francisco under this contract, to wit, the Acapulco, the San Jose, the City 
of Sydney , the Colon, the City of Para, and the San Juan, and agrees to likewise 
make over and deliver to the railroad company like charters of any other steam¬ 
ers placed upon said service under the provisions of Section A, of Article II of 
this contract, simultaneously with the placing of the same upon said service. 

If the steamship company, from any cause except the act of God or the public 
punctually and regularly three trips per month in each direction under and 
according to the provisions of Section A, Article 11 of this contract, then these 
charters are to remain unenforceable. 

If the steamship company, from any cause except the act of God, or the public 
enemy, or arising from the perils of the sea, omits two sailings in any one cal¬ 
endar month during the continuance of this contract, then the above charters 
are, as to all or any one or more of said steamers, at the railroad company’s 
option, to become enforceable, and the railroad company shall have, and is 
hereby given, the absolute right and power to run said vessels, or any of them, 
on the aforesaid described route and service, calling at all ports between Pana¬ 
ma and San Francisco, and vice versa, for the account and risk of and at the 
expense of said steamship company, during the unexpired portion of this con¬ 
tract, it being the express intent and agreement of the parties hereto that the 
covenants of this article shall be specifically enforceable, and that breach thereof 
can not be adequately compensated in damages. 

The steamship company agrees, in the contingency aforesaid, peacefully to 
surrender to the railroad company, upon its demand in writing, the said 
steamers, or any of them, without the intervention of any court or legal pro¬ 
ceedings of any kind whatsoever; the steamship company hereby irrevocably 
giving the railroad company all the power and authority needful in the prem¬ 
ises, in order that the railroad company may take possession of said steamers, 
or of any one or more of them, and operate them, or any one or more of them, 
under the provisions and terms of the charter-parties hereto annexed; and it is 
expressly agreed that in case of any conflict of opinion or doubt as to the respec¬ 
tive rights of the parties hereto under this clause, until such rights are finally 
established by the judgment and decree of a competent court, or by arbitration 
in the manner hereinafter provided, the steamship company or its successors 
will not, in the contingency herein contemplated, hold said ships as against any 
demand of said railroad company, and will not prevent or hinder the use of the 
same by the railroad company in the manner or in the business contemplated by 
this agreement. 


Article XVII. 

The railroad company shall make over and deliver to the steamship company 
charter-parties of even date with the present instrument, at the nominal late of 
one dollar per month and unconditional in terms, of the following steamers 
belonging to said railroad company and now running, or to be run, between New 
York and Colon under this contract, to wit, the Allianca, the Advance, and the 
Finance, and agrees to likewise make over and deliver to the steamship com- 


42 


INVESTIGATION OE PANAMA KAILWAY COMPANY. 


pany like charters of any other steamers placed upon said service under the pro¬ 
visions of Section B, of Article II of this contract, simultaneously with the 
placing of the same upon said service. 

It is hereby further agreed that as long as the railroad company’s steamship 
line performs punctually, and regularly at least three trips per month in each 
direction, under and according to the provisions of Section B, of Article II of 
this contract, then these charters are to remain unenforceable. 

If the railroad company, from any cause except the act of God or-the public 
enemy, or arising from the perils of the sea, omits two sailings in any one cal¬ 
endar month during the continuance of this contract, then the above charters 
are, as to all or any one or more of said steamers, at the steamship company’s 
option to become enforceable, and the steamship company shall have, and is 
hereby given, the absolute right and power to run said vessels, or any of them, 
on the aforesaid described route and service, between New York and Colon, 
and vice versa, for the account and risk of and at the expense of said railroad 
company, during the unexpired portion of this contract, it being the express 
intent and agreement of the parties hereto that the covenants of tins article 
shall be specifically enforceable, and that breach thereof can not be adequately 
compensated in damages. 

The railroad company agrees, in the contingency aforesaid, peacefully to sur¬ 
render to the steamship company, upon its demand in writing, the said steamers, 
or any of them, without the intervention of any court or legal proceedings of 
any kind whatsoever; the railroad company hereby irrevocably giving the steam¬ 
ship company all the power and authority needful in the premises, in order that 
the steamship company may take possession of said steamers, or of any one or 
more of them, and operate them, or any one or more of them, under the provisions 
and terms of the charter-parties hereto annexed; and it is expressly agreed 
that in case of any conflict of opinion or doubt as to the respective rights of the 
parties hereto under this clause, until such rights are finally established by the 
judgment and decree of a competent court, or by arbitration in the manner here¬ 
inafter provided, the railroad company, or its successors, will not, in the con¬ 
tingency herein contemplated, hold said ships as against any demand of said 
steamship company, and will not prevent or hinder the use of the same by the 
steamship company in the manner or in the business contemplated by this agree¬ 
ment. 


Article XVIII. 

For all joint business transacted under this contract and for all services or 
material furnished by the parties thereto to each other there shall, except as 
herein otherwise expressly provided for. be rendered at New York a monthly 
account, on the 25th day of each month, for the business of the preceding month, 
such statement to cover all business of the preceding month cleared during said 
month, and the sums due shall be paid on that date to the creditor company. 

Article XIX. 

Any and all questions that shall or may arise touching this agreement, or the 
construction thereof, or any matters or things to be done or performed by either 
of the parties hereunder, shall be submitted to the decision and award of three 
arbitrators, who shall be disinterested persons, and who shall be chosen, one by 
each of the parties hereto, and the third by the two so chosen. Either party 
hereto may. at any time, notify the other, in writing, that it elects to submit any 
such matter of difference to arbiraion hereunder and name an arbitrator, and 
if the other party shall fail or omit to name an arbitrator within fifteen days 
after written notice of such selection of an arbitrator by the other party and 
written request to name an arbitrator, the arbitrator named by the party giving 
such notice shall name an arbitrator lor and on behalf of the party so failing 
or omitting, who shall have the same power and authority as though he had been 
chosen and nominated by such party. And the decision and award of any two of 
such arbitrators with respect to tBe matters so submitted to them shall be 
binding and conclusive upon the parties; and each of the parties hereto does bind 
itself and its successors faithfully to abide by and carry out any award so made 
by any two of the arbitrators appointed as aforesaid. Any question of violation 
or failure to observe this agreement by either party, or any other question aris¬ 
ing between them hereunder, may be submitted to such arbitrators, and they 
shall determine, first, as to the fact, and, secondly, as to the amount of money 


IN\ ESTIMATION OF PANAMA RAILWAY COMPANY. 45 

damages to be paid by the party found guilty to the party making the charge, 
01 ,J‘ 10 Particular thing to be done or to be refrained from being done by such 
gui ty party, and such amount shall be paid, and such award shall be complied 
" 1 within ten days of the rendering of such award. The two parties both 
agree to furnish to the arbitrators any paper, instrument, or book in their pos¬ 
session which such arbitrators may request them to produce. Should any arbi¬ 
tration tail for any cause, then such proceedings as above prescribed may be 
taken de novo by either party to this agreemnet. All hearings by said arbi¬ 
trators shall be held in New York or on the Isthmus of Panama, or in San 
f lancisco, oi such other place where witnesses necessary to appear before the 
arbitrators may be obtained with the least expense to the parties to this con¬ 
tract, and all fees and expenses of such arbitrators shall be borne by the party 
against whom the award of the arbitrators shall be made, and shall "be assessed 
by said arbitrators and made part of their award. 

this article shall be considered of the essence of this agreement and any 
bieai h of oi failure to observe any of the terms thereof shall be deemed to be a 
material breach of the entire contract. 

Article XX. 

« 

Any °f the conditions of Articles V, VII, VIII, IX, X, and XI of this agreement 
may be altered by consent in writing of the parties hereto, signed by their 
i espeeti\ e presidents or vice-presidents, without affecting any of the other condi¬ 
tions of this agreement. 

Article XXI. 


Subject to the provisions of a contemporaneous agreement between the parties 
hereto of even date herewith this contract, except as herein otherwise expressly 
prescribed, shall remain in force for three years from the eleventh day of June, 
1902, and for the further period of two years, if either party shall so "elect, and 
if such party shall have given notice of such election to the other party hereto 
at least ninety (90) days before the expiration of the first term of three years. 

In witness whereof the said parties hereto have caused this instrument to be 
signed in their corporate names by their respective presidents, and their 
respective corporate seals to he hereunto affixed and attested by their respective 
secretaries the day and year first herein above written. 

Panama Railroad Company, 

By .J. Edward Simmons, President. 

Attest: 


E. A. Drake. Secretary. 


Attest: 


Pacific Mail Steamship Company, 
I>y Charles H. Tweed, President . 

.Tos. Uellen, Secretary. 


State of New York. County of New York , ss: 

On this 11th day of June, 1902, before me personally appeared J. Edward Sim¬ 
mons, personally known to me to be the individual who subscribed the within 
instrument for and in behalf of the Panama Railroad Company, who, being by 
me duly sworn, did depose and say: That he resided in New York City; that he 
was the president of the said corporation; that he knew the corporate seal 
of the said corporation; that the seal affixed to the said instrument was such 
corporate seal, and that the said instrument was signed by him and sealed in 
behalf of the said corporation by authority of its board of directors; and the 
said J. Edward Simmons acknowledged the said instrument to be the act and 
deed of the said corporation, and that the same was executed by said corporation 
freely and voluntarily for the purposes therein mentioned. 

[Notarial seal.] John J. Tierney, 

Notary Public, Kings County. 

Certificate fled in New York County, N. Y. 


State of New York, County of New York, ss: 

On this 11th day of June, 1902, before me personally appeared E. A. Drake, 
personally known to me to be the individual who subscribed the within instru¬ 
ment for and in behalf of the Panama Railroad Company, who, being by me duly 


44 


INVESTIGATION OF PANAMA KAILWAY COMPANY. 


sworn, did depose and say: That he resided in New York City; that he was 
the secretary of the said corporation; that he knew the corporate seal of the said 
corporation: that the seal affixed to the said instrument was such corporate seal, 
and that the said instrument was signed and sealed by him in behalf of the said 
corporation by authority of its board of directors; and the said E. A. Drake 
acknowledged the said instrument to be the act and deed of the said corporation, 
and that the same was executed by said corporation freely and voluntarily for 
the purposes therein mentioned. 

[Notarial seal.] John J. Tierney, 

Notary Public, Kings County. 

Certificate filed in New York Comity. N. Y. 


£tate of New York, 

County of New York, ss: 

On this 11th day of June, 1902, before me personally appeared C. IT. Tweed, 
personally known to me to be the individual who subscribed the within instru¬ 
ment, for and in behalf of the Pacific Mail Steamship Company, who, being 
by me duly aworn, did depose and say: That he resided in New York City; 
that he was the president of the said corporation; that he knew the corporate 
seal of the said corporation; that the seal affixed to the said instrument was 
such corporate seal, and that the said instrument was signed by him and sealed 
in behalf of the said corporation by authority of its board of directors ; and the 
said C. H. Tweed acknowledged the said instrument to be the act and deed of 
the said corporation, and that the same was executed by said corporation freely 
and voluntarily for the purposes therein mentioned. 

[Notarial seal.] John J. Tierney, 

Notary Public, Kings County. 

Certificate filed in New York County, N. Y. 

State of New York, 

County of New York, ss: 

On this 11th day of June, 1902, before me personally appeared Joseph Hellen, 
personally known to me to be the individual who subscribed the within instru¬ 
ment for and in behalf of the Pacific Mail Steamship Company, who, being by 
me duly sworn, did depose and say: That he resided in New York City; that he 
was the secretary of the said corporation; that he knew the corporate seal of 
the said corporation; that the seal affixed to the said instrument was such 
corporate seal, and that the said instrument was signed and sealed by him in 
behalf of the said corporation by authority of its board of directors: and the 
said Joseph Hellen acknowledged the said instrument to be the act and deed of 
the said corporation, and that the same was executed by said corporation freely 
and voluntarily for the purposes therein mentioned. 

[Notarial seal.] John J. Tierney, 

Notary Public, Kings County. 

Certificate filed in New York County, N. Y. 


[Extract from minutes of regular meeting of the board of directors of the Panama Rail¬ 
road Co., held at the office of the company, No. 24 State street, New York, on Thursday, 
June 12th, 1902] 

Resolved. That the contract and supplemental agreement between the Pacific 
Mail S. S. Co. and this company, which have been approved by counsel and now 
submitted to this board, be, and the same are hereby, ratified, approved, and 
adopted, said agreements being as follows: 

And the president and secretary of this company are hereby fully authorized 
and empowered to execute, acknowledge, and deliver for and in behalf of this 
company, and under its corporate seal, the agreements aforesaid, together with 
the several charter parties and stipulations provided by said agreements to be 
made and delivered at this time or any time hereafter by this company, said 
charter parties and stipulations to be in such form and terms as to the execu¬ 
tive committee may seem proper in order to carry out said agreements: and said 
officers are also fully authorized and empowered to do all acts and things which 
they may deem necessary or proper to effectuate the completion of said agree¬ 
ments and the full establishment of the same. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


45 


I heid >3 ceitif> the foregoing to be a true and correct copy of the resolution 
adopted by the board of directors at its meeting held on June 12th ]90‘> duly 
called and held. ' J 

Witness my hand and official seal this 12th day of June, 1 !) 02 . 

[Seal of Panama Railroad Co.] E. A. Drake, Secretary. 


[Extract from the nunutes ot a special meeting of the board of directors of the Pacific 
Mail Steamship Co., held at No. 120 Broadway, in the city of New York, on Wednesday, 
June 11th, 1J0^, at 3 o clock p. m. A quorum being present and assenting.] 


Resolved. That the agreement and the supplemental agreement between the 
Panama Railroad Company and this company, which are now submitted to the 
board, be. and the same are hereby, approved, and that the president and secre¬ 
tary of this company be, and they are hereby, authorized to execute said agree¬ 
ment and supplemental agreement under the corporate seal of this company, and 
to acknowledge and deliver the same, and to execute, acknowledge, and deliver 
charter parties as prescribed in said agreement, and to do such other acts and 
things as they may deem necessary and proper to carry out said agreement and 
supplemental agreement. 

Attest: 

A true copy. 

[Seal of Pacific Mail Steamship Co.] Jos. Hellen, Secretary. 


Exhibit 7a. 

* 'i 

“ The Panama Route.” 

SUPPLEMENTAL CONTRACT BETWEEN THE PANAMA RAILROAD COMPANY AND THE 

PACIFIC MAIL STEAMSHIP COMPANY. 

[Dated June 11, 1902.] 

This memorandum of an agreement, made and entered into this eleventh day 
of June, 1902. by and between the Panama Railroad Company, a corporation 
duly chartered by and organized under the laws of the State of New York, and 
hereinafter called the railroad company, party of the first part, and the Pacific 
Mail Steamship Company, also a corporation duly chartered by and organized 
under the laws of said State, and hereinafter called the steamship company, 
party of the second part, witnesseth. that 

Whereas the parties hereto have entered into another agreement, bearing even 
date herewith, for the purpose of regulating the traffic arrangements between 
them and hereinafter called the traffic agreement; and 

Whereas a suit is now pending before the supreme court of the Republic of 
Colombia, brought by the attorney-general of said Republic against the railroad 
company, to compel the railroad company to grant to all carriers the privilege 
of issuing through bills of lading over its line of railroad and to forbid it to 
give to any carrier special privileges or advantages in respect of transportation 
of goods over said railroad; and 

Whereas carriers of goods and passengers from Panama to points upon the 
Pacific, north of said city, may enter into competition with the Panama route and 
may embarrass the operations of said route, and it may be necessary for the 
proper conduct of the business that other independent means of transportation 
from Panama to points on the Pacific, south of said city, should be provided: 

Now, therefore, in consideration of the premises and of the sum of one dollar 
by each of the parties hereto to the other in hand paid, and of other good and 
valuable considerations, the receipt whereof is hereby acknowledged, and of the 
making of said traffic agreement and of the various covenants of the respective 
parties hereinafter contained, the parties aforesaid have covenanted and agreed, 
and do hereby covenant and agree, to and with each other as follows: 

First. The railroad company and the steamship company w r ill cooperate in 
defending, or procuring the dismissal of the said suit now pending before the 
supreme court of the Republic of Colombia, and will contribute in the proportion 
of 55 per cent by the railroad company and 45 per cent by the steamship com¬ 
pany to the expenses hereafter and during the operation of said traffic agree- 



46 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


ment. incurred for counsel in connection with the defense of said suit, or with 
such efforts to procure the dismissal thereof. 

Second. If the railroad company should not, on account of its inability to do 
so. or for any other reason, give to the steamship company the exclusive privi¬ 
lege of issuing through bills of lading over its line of railroad, to and from the 
ports referred to in the first paragraph of Article I of said traffic agreement, in 
connection with the railroad company and each and every one of its Atlantic 
connecting lines, then the steamship company shall he entitled, at its option, to 
terminate said traffic agreement upon giving written notice to the railroad com¬ 
pany of its election so to terminate the same. 

Third. Upon the execution of the said traffic agreement by the parties hereto 
the railroad company is to forthwith give notice to all steamship lines running 
steamers between Panama and ports on the Pacific coast north thereof, other 
than the Pacific Mail Steamship Company, that upon the expiration of ninety 
days from the giving of such notice the railroad company will cease to through- 
bill with the steamship lines so notified, or either or any of them, in respect of 
the transportation of merchandise on the Pacific coast north of Panama, and 
the parties hereto shall endeavor to procure arrangements between such other 
steamship lines so notified and the parties hereto for a division of territory 
under winch the transportation of merchandise on the Pacific coast north of 
Panama shall he conducted by the Pacific Mail Steamship Company only, and 
the transportation of merchandise on the Pacific coast south of Panama shall be 
conducted by such other lines and for a mutual interchange of business at Pan¬ 
ama between said Pacific Mail Steamship Company and such other steamship 
lines. 

If on or before the expiration of ninety days from the giving of such notice 
such other steamship lines shall not have agreed to such division of territory 
and to such mutual interchange of business at Panama as above prescribed, but 
shall conduct the transportation of merchandise north of Panama, the Pacific 
Mail Steamship Company may, at its own expense, but otherwise in cooperation 
with the Panama Railroad Company, inaugurate a steamship line extneding as 
far south as Valparaiso, and the Panama Railroad Company will extend to the 
Pacific Mail Steamship Company, in respect of such line, fcilities in all respects 
equal to those which the railroad company may accord to any other line oper¬ 
ating steamers south of Panama. 

If, in consequence of the notification to be given as above prescribed from the 
railroad company to the other steamship lines, or such' efforts to secure a divi¬ 
sion of territory as above provided, such other steamship lines shall withdraw 
their existing lines connecting Panama with points, on the Pacific coast south 
thereof, then the Pacific Mail Steamship Company will, if the railroad company 
shall so request, forthwith make arrangements for providing for a line of steamers 
running south from Panama as far as Valparaiso, and shall within at most 120 
days after the making of such request establish and begin the actual operation of 
such line; and in that event the railroad company will thereafter and so long 
as such line shall be maintained and operated in a regular and efficient manner 
so as to accommodate properly the traffic between said points and Panama in 
connection with the railroad, refuse and continue to refuse to through-bill with 
other steamship lines in respect of business south of Panama, and will through- 
bill exclusively with the Pacific Mail Steamship Company for such business, and 
will extend to the Pacific Mail Steamship Company facilities for such business in 
all respects equal to those which by the said traffic agreement are extended to 
the business conducted by the Pacific Mail Steamship Company north of Panama. 
Provided, however, that the running of such line of steamers south from Panama 
by the Pacific Mail Steamship Company and such exclusive through-billing privi¬ 
lege may be terminated upon one year’s notice from the Pacific Mail Steamship 
Company to the Panama Railroad Company of its election to terminate the 
running of such line, or upon one year's notice from the Panama Railroad Com¬ 
pany to the Pacific Mail Steamship Company of its election to terminate such 
exclusive through-billing privileges. 

Fourth. It is mutually and expressly understood and agreed that if at any 
time during the continuance of said traffic agreement, a majority of the shares 
of the railroad company or its railroad property shall be purchased or acquired 
by the United States of America, or by any person or persons representing it or 
acting in its behalf, then either party hereto may give notice in writing to 
the other of its intention to terminate said traffic agreement, and at the expira¬ 
tion of six months from the givng of such notice, the said traffic agreement and 
the previous articles of this agreement shall terminate, come to an end, and 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 47 


be utterly null and void thenceforth, anything in said traffic agreement or herein 
contained to the contrary notwithstanding. 

In witness whereof each of the parties hereto has caused these presents to he 
signed by its president, attested by its secretary, and sealed with its corporate 
seal, the day and year first hereinabove written. 

Panama Rail Road Company, 
By .T. Edward Simmons, President. 

Attest: 

E. A. Drake, Secretary. 


Attest: 


Pacific Mail Steamship Company, 
By Charles H. Tweed, President, 


Jos. Hellen, Secretary. 

State of New York, 

County of 'New York, ss: 

On this lltli day of June, 11)02. before me personally appeared J. Edward Sim¬ 
mons, personally known to me to lie the individual who subscribed the within 
instrument for and in behalf of the Panama Railroad Company, who, being 
by me duly sworn, did depose and say: That he resided in New York City; that 
he was the president of the said corporation; that he knew the corporate seal of 
the said corporation; that the seal affixed to the said instrument was such cor¬ 
porate seal, and that the said instrument was signed by him and sealed in behalf 
of the said corporation by authority of its board of directors; and the said J. 
Edward Simmons acknowledged the said instrument to be the act and deed of 
the said corporation, and that the same was executed by said corporation freely 
and voluntarily for the purposes therein mentioned. 

[Notarial seal.] 

John J. Tierney, 

Notary Public, Kinys Co.. 

Certificate filed in New York County. N. Y. 


State of New York, 

County of New York, ss: 

On this lltli day of June, 1902, before me personally appeared E. A. Drake, 
personally known to me to be the individual who subscribed the within instru¬ 
ment for and in behalf of the Panama Railroad Company, who, being by me 
duly sworn, did depose and say: That he resided in New York City; that he was 
the secretary of the said corporation ; that he knew the corporate seal of the 
said corporation ; that the seal affixed to the said instrument was such corpo¬ 
rate seal, and that the said instrument was signed and sealed by him in behalf 
of the said corporation by authority of its board of directors; and the said E. A. 
Drake acknowledged the said instrument to be the act and deed of the said cor¬ 
poration, and that the same was executed by said corporation freely and vol¬ 
untarily for the purposes therein mentioned. 

[Notarial seal.] 

John J. Tierney, 

Notary Public, Kings Co.. 

Certificate filed in New York County, N. Y. 


State of New York, 

Cqunty of New York, ss: 

On this lltli day of June, 1902, before me personally appeared C. H. Tweed, 
personally known to me to be the individual who subscribed the within instru¬ 
ment for*and in behalf of the Pacific Mail Steamship Company, who, being by 
me duly sworn, did depose and say; That he resided in New York City; that he 
was the president of said corporation; that he knew the corporate seal of 
the said corporation; that the seal affixed to the said instrument was such cor¬ 
porate seal, and that the said instrument was signed by him and sealed in 
behalf of the said corporation by authority of its board of directors; and the 
said C. H. Tweed acknowledged the said instrument to be the act and deed of 
the said corporation, and that the same was executed by said corporation freely 
and voluntarily for the purposes therein mentioned. 

[Notarial seal.] John J Thirney, 

Notary Public, Kings Co. 

Certificate filed in New York County, N. Y. 


48 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


State of New York, 

Vonvt)j of New York, ss: 

On this lltli day of June, 1902. before me personally appeared Joseph Ilellen, 
personally known to me to be the individual who subscribed the within instru¬ 
ment for and in behalf of the Pacific Mail Steamship Company, who, being by 
me duly sworn, did depose and say: That he resided in New York City; that he 
was the secretary of the said corporation: that he knew the corporate seal of 
the said corporation; that the seal affixed to the said instrument was such cor¬ 
porate seal, and that the said instrument was signed and sealed by him in behalf 
of the said corporation by authority of its board of directors; and the said 
Joseph Ilellen acknowledged the said instrument to he the act and deed of the 
said corporation, and that the same was executed by said corporation freely and 
voluntarily for the purposes therein mentioned. 

[Notarial seal.] John J. Tierney, 

Notary Public, Kings Co. 

Certificate filed in New York County . N. Y. 

[Extracts from minutes of regular meeting of the board of directors of the Panama Rail¬ 
road Co., held at the office of the company, No. 24 State street, New York, on Thursday, 

June 12th, 1902.] 

Resolved. That the contract and supplemental agreement between the Pacific 
Mail S. S. Co. and this company, which have been approved by counsel and now 
submitted to this board, be, and the same are hereby, ratified, approved, and 
adopted, said agreements being as follows: 

****** * 

And the president and secretary of this company are hereby fully authorized 
and empowered to execute, acknowledge, and deliver, for and in behalf of this 
company, and under its corporate seal, the agreements aforesaid, together with 
the several charter parties and stipulations provided by said agreements to be 
made and delivered at this time or any time hereafter by this company; said 
charter parties and stipulations to be in such form and terms as to the execu¬ 
tive committee may seem proper, in order to carry out said agreements; and 
said officers are also fully authorized and empowered to do all acts and things 
which they may deem necessary or proper to effectuate the completion of said 
agreements and the full establishment of the same. 

I hereby certify the foregoing to be a true and correct copy of the resolution 
adopted by the board of directors at its meeting held on June 12th, 1902, duly 
called and held. 

Witness my hand and official seal this 12tli day of June, 1902. 

[Seal of Panama Railroad Co.] E. A. Drake, Secretary. 

[Extract from the minutes of a special meeting of the board of directors of the Pacifi< 

Mail Steamship Co., held at No. 120 Broadway, in the city of New York, on Wednesday, 

June 11, 1902, at 3 o’clock p. m. A quorum being present and assenting.] 

Resolved, That the agreement and the supplemental agreement between the 
Panama Railroad Company and this company, which are now submitted to the 
board, be and the same are hereby approved, and that the president and secre¬ 
tary of this company be and they are hereby authorized to execute said agree¬ 
ment and supplemental agreement under the corporate seal of this company, and 
to acknowledge and deliver the same, and to execute, acknowledge, and deliver 
charter parties as prescribed in said agreement, and to do such other acts and 
things as they may deem necessary and proper to carry out said agreement and 
supplementa 1 agreement. 

Attest: 

A true copy. 

[Seal of Pacific Mail Steamship Co.] Jos. Hellen, Secretary. 

Mr. Cromwell. It is a profitable contract to this company. 

Mr. Esch. In that connection, have you contracts with the South 
American Steamship Company? 

Mr. Cromwell. We have contracts, but not of such a permanent 
character. They are terminable on short notice. They are current 
business contracts. 

The Chairman. I would be glad if you would explain some of 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


49 


the environment of the Pacific mail contract. The contract is 
between the Panama Railroad Company and the Pacific Mail Steam¬ 
ship Company; is that it? They are the parties to the contract? 

Mr. Cromwell. Yes, sir. 

The Chairman, is the Pacific Mail Steamship Company a part of 
any railroad company or owned by any railroad company? 

Mr.^ Cromwell. We have no direct knowledge on that subject, 
Mr. Chairman. It is a matter of general information, however, 
that the majority of the stock of the^Pacific Mail Steamship Com¬ 
pany is held by the Union Pacific. It was formerly held by the 
Southern Pacific, but is now controlled by the Union Pacific Rail¬ 
road Company. 

The Chairman. Who, in this city, represents the Union Pacific 
Railroad Company? 

Mr. Cromwell. The president of that corporation, Mr. Harriman. 

The Chairman. You say, then, that the Panama Railroad Com¬ 
pany has no relationship with any transcontinental railway? 

Mr. Cromwell. None; on the contrary, we actively compete with 
them. In former years such a relation did exist, Mr. Chairman, 
but for a number of years no relation has existed with a transcon¬ 
tinental railroad. In 1898 we broke with them absolutely and have 
fought them ever since. 

The Chairman. When did that cease? 

Mr. Cromwell. In 1893. 

Mr. Simmons. We then began to operate our own lines on the 
Atlantic and on the Pacific. 

The Chairman. In 1893 the relationship that had existed between 
the Panama Railroad Company and other railroad companies 
ceased ? 

Mr. Cromwell. It did, and never has been resumed. 

The Chairman. You did have a contract with the Pacific Mail 
Steamship Company ? 

Mr. Cromwell. Yes. sir. 

The Chairman. Did that give any exclusive privileges on the 
Pacific side? 

Mr. Cromwell. It did. 

The Chairman. Between what points? 

Mr. Cromwell. Panama and San Francisco. 

The Chairman. Did in include points on the South American 
coast ? 

Mr. Cromw t ell. Not below- Panama. 

The Chairman. In a general w r av how T have rates compared between 
Ncw t York and Panama and New York and San Francisco? 

Mr. Cromwell. They have been low T er under the new 7 arrangement. 

The Chairman. Hoav much difference w 7 as there between the rate 
from New York to Panama and from Panama to San Francisco? 

Mr. Cromwell. I can not give you the exact rate. 

The Chairman. You are not prepared to answer that question? 

Mr. Cromw 7 ell. I can answer in a general way. 

The Chairman. How do those rates compare, in a general way ? 

Mr. Cromwell. They are low 7 er than they were. 

The Chairman. What is the basis of making that rate—your basic 
point ? 


PAN RY— 05-4 



50 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Cromwell. Our basic point is to make a rate that will take the 
business away from the transcontinental railroads, and we have to 
make a rate somewhat lower—from 20 to 30 per cent. 

The Chairman. Of the rates from New York to Panama, or New 
York to San Francisco, which is the lower rate? 

Mr. Cromwell. There is really no comparison between the two. 

The Chairman. Have you any exclusive contract between the Pan¬ 
ama Railroad Company and any other Pacific side steamship com¬ 
pany to other points than San Francisco? 

Mr. Cromwell. The only exclusive contracts we have is with the 
Pacific Mail Steamship Company, and notice of the termination of 
that contract has been given. That contract will thus expire in July 
of this year. 

The Chairman. Given by the Commissioners? 

Mr. Cromwell. No; the notice was given by this corporation. The 
contract with the Pacific Mail contains a provision as follows: 

Fourth. It is mutually and expressly understood and agreed that if at any 
time during the continuance of said tratfic* agreement a majority of the shares 
of the railroad company or its railroad property shall he purchased or acquired 
by the United States of America, or by any person or persons representing it or 
acting in its behalf, then either party hereto may give notices in writing to the 
other of its intention to terminate said traffic agreement, and at the expiration of 
six months from the giving of such notice the said traffic agreement and the 
previous articles of this agreement shall terminate, come to an end. and be 
utterly null and void henceforth, anything in said traffic agreement or herein 
contained to the contrary notwithstanding. 


The Chairman. Under that clause this notice was given? 

Mr. Cromwell. Yes. sir. Upon the request of the majority of the 
stockholders of this company the board of directors exercised the 
reserve right under that contract, and gave notice of the termination. 
That notice has been given in writing, and the six-month period is 
now running. 

Mr. Townsend. Now, Mr. Cromwell, a long time ago you had some 
arrangement, or the road had some arrangement, with transconti¬ 
nental roads. Do you know when that terminated? 

Mr. Cromwell. In 1893 it had the arrangement, to which I have 
already referred, with the Pacific Mail Steamship Company, which 
itself had contract with the transcontinental lines. 

Mr. Townsend. What was the arrangement before that? 

Mr. Cromwell. It was in substance a guarantee by the Pacific Mail 
to the Panama Railroad Company of a fixed sum per month to cover 
the use of a fixed space (a rental-space contract), by which the Pacific 
Mail agreed to pay for a certain space in each ship on the tonnage of 
each ship whether they filled it or not. 

Mr. Townsend. You had that arrangement simply with- 

Mr. Cromwell. With the Pacific Mail Steamship Company. 

Mr. Townsend. Why did you terminate that contract in 1893? 

Mr. Cromwell. It expired by limitation. 

Mr. Townsend. You never have renewed it? 

Mr. Cromwell. It expired by limitation in 1893, and we did not 
renew it. 


Mr. Cromwell. The contract was originally made in 1878, and was 
existing when present board of directors came into office. It ran until 
'1893, when it expired by limitation, and this company did not renew 
it, but entered into other arrangements. Since that time (1893) this 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


51 


company has had no division of rates or relation with any other rail¬ 
road company or any other railroad connection. 

Thereupon, at 12.-10 o’clock p. m., the committee adjourned to meet 
again at 1.45 p. m. 

AFTERNOON SESSION. 

Committee called to order at 1.45 p. m. 

The same members present as at the morning session. 

Mr. Townsend. Now, Mr. Cromwell, you were active in assisting 
in the transfer of the canal company property to the United States, 
were you not ? 

Mr. Cromwell. Yes, sir. 1 consummated the transfer as general 
counsel of the canal company. 

Mr. Townsend. At that time was the United States furnished with 
an itemized list of the propertv that was purchased bv it? 

Mr. Cromwell. It was furnished with a schedule of all the per¬ 
sonal property of the canal company on the Isthmus of Panama, 
numbering about 15.000 items. 

Mr. Townsend. Filed with the War Department, I suppose? 

Mr. Cromwell. That was filed with the Secretary of State. 

Mr. Townsend. When was that, do you remember? 

Mr. Cromwell. That was in the spring of 1902. 

Mr. Townsend. When did you commence your negotiations with 
the United States for the sale of the railroad; about when? 

Mr. Cromwell. There never was any negotiation for the sale of 
the Panama Railroad by itself. The transaction which is known as 
the sale from the Aew Panama Canal Company to the United States 
comprised the Panama Canal concession, the partly constructed canal, 
tiie plant, machinery, real estate, and divers personal property of the 
New Panama Canal Company, together with 68,887 shares of the 
capital stock of the Panama Railroad Company. 

Mr. Townsend. All of the shares they held? 

Mr. Cromwell. All the shares they then held. 

Mr. Townsend. That is all the United States holds now excepting 
the 101 ? 

Mr. Cromwell. Not quite that. When the negotiations began the 
Panama Canal Company did not own quite as many shares as they sub¬ 
sequently gave to the Government. The transaction with the Govern¬ 
ment was based upon a smaller number of shares—about 350. The 
canal company had acquired a few other shares by purchase, and the 
company and myself considered it liberal to give those to the United 
States in addition to the amount which the canal company originally 
acquired. These additional shares were also delivered to the United 
States on the final transfer, and are included in the 68,887. 

Mr. Townsend. Did you have negotiations with Mr. Walker and 
other members of the Commission for the purchase of this property?. 

All*. Cromwell. Strictly speaking, the negotiations were under the 
direction of the President of the United States himself. 

Mr. Townsend. That was carried on, to some extent, through the 
Commission, was it not? 

Mr. Cromwell. The Commission obtained very valuable data, and 
the offer of the canal company was addressed to them, but action 
thereon, of course, rested with the President. 


52 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Townsend. This inventory of stock was made in the spring of 
1902. When was the transfer made, at what time? 

Mr. Cromwell. Concluded May 7, 1904. 

Mr. Townsend. What was done between the filing of the inventory 
m the spring of 1902 and the transfer of property in 1904 relative to 
these negotiations? 

Mr. Cromwell. How much do you want me to state ? 

Mr. Townsend. What remained to be done after the inventory was 
filed in 1902 to complete the transfer ? 

Mr. Cromwell. Everything. The United States had not accepted 
the proposal of the canal company in 1902. 

Mr. Townsend. When did they accept? 

Mr. Cromwell. You will recall that the President himself had not 
been authorized by Congress to deal with the question until the 
Spooner law of June 28, 1902. You will remember, also, that that law 
made the choice of the Panama route and purchase of Panama Canal 
subject to the negotiation and ratification of a treaty with Colombia. 
A treaty was first made with Colombia, but was not ratified by that 
country. Subsequent to the independence of Panama a treaty was 
made with that nation, but not exchanged until February 26, 1904. 
You will remember, also, that the law of June 28, 1902, further pro¬ 
vided that the choice of the Panama route and the purchase of 
Panama Canal should not be consummated unless the titles were 
first approved by the President, and that took a year or so more of 
examination, etc. 

Mr. Townsend. So that the canal company did not feel that it was 
obligated to make these transfers to the United States until it was 
actually consummated ? 

Mr. Cromwell. No, sir; that is right, and until it was paid for. 
Just as the United States did not consider that it was obligated to pay 
interest on the 40 millions pending the conclusion. Interest on 
840.000,000 from January 11, 1902, to April 1, 1904, would have 
amounted to over $3,300,000, even at a rate as low as 4 per cent. 

Mr. Townsend. There was something left to be done? 

Mr. Cromwell. And the actual fact is that it was not paid for 
until two months after the property was completely delivered on May 
7, 1904, but that delay was agreed to by us. 

Mr. Townsend. Did you file any subsequent statement or inventory 
with the Government after the one of the spring of 1902 ? 

Mr. Cromwell. No, sir. 

Mr. Townsend. Did you make a detailed statement to them as to 
the condition of the property? 

Mr. Cromwell. No other was asked for or given. 

Mr. Townsend. So that they did not inquire what had been done 
with this property between the spring of 1902 and the spring of 1904 
when the sale was actually made? 

Mr. Cromwell. Yes, sir; so far as the Canal Company’s property 
and operations were concerned, the United States Government was 
in daily observation of the work that was progressing. This was 
done through the appointment of the special agents of the Govern¬ 
ment, sent to and located upon the Isthmus for that very purpose, 
and to whom each day accounts of the work were furnished and 
under whose eye all the construction work was progressing. So far 


INVESTIGATION OF PANAMA'RAILWAY COMPANY. 


53 


as the railroad property and operations were concerned, the annual 
reports of the company, printed copies of which we have furnished 
to you, were furnished to the Isthmian Canal Commission. Besides 
this, their Isthmian agents had general knowdedge of the railroad 
operations on the Isthmus- 

Mr. Townsend. The only report the\^ had was the report of De¬ 
cember 31, 1903 ? 

Mr. Cromavell. No, sir. They also had those of 1901 and 1902. 

Mr. Townsend. They had that prior to the inventory of 1902? 

Mr. Cromwell. Yes, sir. 

Mr. Tow nsend. So that the only thing that you presented that 
they had after the inventory of 1902 was this report of December 
31. 1903? 

Mr. Cromwell. And the annual report of 1902. 

Mr. Townsend. December, 1902? 

Mr. Cromwell. Yes. 

Mr. Townsend. They had that? 

Mr. Cromwell. That, and that of December, 1901, also, as well as 
many preceding ones and much general data, which I can not of 
course enumerate, and wdiich they obtained in their own way. 

Mr. Townsend. The United States Government kept very close 
track ? 

Mr. Cromwell. Yes, sir. They took cognizance of the wdiole 
affair through their representatives on the Isthmus and through the 
Commission; kept track of the current conduct of business of the 
railroad company and of the canal construction in progress. 

Mr. Townsend. That proposition of the Canal Company in 1902, 
if it can be considered a proposition, to sell to the United States, in¬ 
cluded all the assets of the company, did it? 

Mr. Cromwell. All the property of the Canal Company on the 
Isthmus, together with these shares of the railroad company. 

Mr. Townsend. It was not intended to convey any property that 
was not on the Isthmus ? 

Mr. Cromwell. The best statement is in the offer itself, arid I 
w'ould not venture to vary from it. The Canal Company addressed 
to the president of the Isthmian Canal Commission tw T o cable mes¬ 
sages which embraced the so-called offer. The first cable is dated 
January 9, 1902, and is as follows: "Admiral J. G. Walker, Presi¬ 
dent Isthmian Canal Commission, Corcoran Building, Washington. 
The New' Panama Canal Company declares that it is ready to accept 
for the totality without exception, of its property and rights on the 
Isthmus the amount of $40,000,000, the above offer to remain in force 
up to March 4, 1903. (Signed) Bo, President of the Board. 11 And 
a further cable on January 11, 1902, as follows: “Admiral J. G. 
Walker, President Isthmian Canal Commission, Corcoran Building, 
Washington. Offer of sale of our property applies also to all of our 
maps.and archives in Paris. (Signed) Bo, President of the Board.” 

Mr. Townsend. You considered that any property that you might 
have in New York or elsewhere, except in Paris or on the Isthmus, 
w T as not to be conveyed ? 

Mr. Cromavell. That is right; but it included the Panama Kail- 
road shares which were held in Paris, although not specifically men¬ 
tioned in the offer. 


54 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Townsend. Did you state to the-representatives of the United 
States Government that you had property that was not included—not 
located—at those places, at the Isthmus or Paris? 

Mr. Cromwell. We had our cash assets at both places. Of course 
it goes without saying that such items were not included. 

Mr. Townsend. Your cash assets on the Isthmus were to go to the 
United States? 

Mr. Cromwell. No, sir; the Canal Company of course did not sell 
cash assets. 

Mr. Townsend. You did not include cash as assets? 

Mr. Cromwell. No, sir. 

Mr. Townsend. But you include the bonds that you bought up and 
turned into the Treasury as assets? 

Mr. Cromwell. Permit me to say, Mr. Townsend, that the subject 
to which you now refer is the matter of the Panama Railroad and not 
that of the Canal Company. Of course the Canal Company had 
nothing to do with bonds of the railroad company, for that was a 
matter under the jurisdiction of the railroad company alone. 

Mr. Townsend. You sold the shares of the Panama Railroad? 

Mr. Cromwell. Simply the shares; yes, sir. We did not, of course, 
sell the Panama Railroad, for that property was owned by" the Pan¬ 
ama Railroad Company itself. But we sold 68,886 shares out of a 
total issue of 70,000 shares. 

Mr. Townsend. When you got ready to declare your dividend in 
1903, did you consult the United States about it? 

Mr. Cromwell. In the year 1903? No, sir. 

Mr. Townsend. You did not sav anything? 

Mr. Cromwell. Oh. no; there was no duty or occasion to do so. 
The United States had not yet acquired the property nor paid any¬ 
thing on it; nor did it pay current interest on the $40,000,000. 

Mr. Townsend. Now, do you know Avhat the custom has been in 
making out the reports of assets of the road as to depreciating the 
value of the road, and property of the road, rolling stock, or anything 
else? Have you made depreciations for that? 

Mr. Cromwell. Do you mean allowances in the annual report? 

Mr. Townsend. Yes; did you have a depreciation fund? 

Mr. Drake. We keep the property up as we go along. We spend 
part of our earnings each year in maintaining the property. Most 
of the equipment is twenty-five or thirty years old, but it has been 
kept in a serviceable condition all that time out of current earnings. 

Mr. Townsend. Whenever you have repaired anything have you 
put it in as extra capital ? 

Mr. Cromwell. No, sir. The company has maintained its plant, 
comprising the roadbed, rolling stock, equipment, and the like, out 
of the current earnings of the company, charging this to operating 
expenses and not charging it to the capital account. Permanent 
improvements, such as the La Boca pier, which cost $2,250,000, ay as, 
of course, credited to the capital account, not as current repairs. 

Mr. Toavnsend. You did not include that cost in the permanent 
improvements ? 

Mr. Cromwell. Certainly; all of the La Boca improvement. Also 
for the erection of a light plant at Colon, an ice-making plant at 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


55 


Colon, the new tracks for the Colon yard, improvements to Pier No. 2 
at Colon, new coal lighters, and items of that permanent character 
increasing the capital investment. 

Put the current maintenance of the rolling stock is charged as an 
operating expense and not charged to the capital account. The per¬ 
manent items I have referred to are additions to the property itself— 
new construction—not merely current repairs. 

Mr. Townsend. I notice an item in your statement showing dis¬ 
position of your surplus earnings, the report of November 30, 1904, 
in which you say that 693 7 per cent sterling mortgage bonds in 
voluntary sinking fund canceled, $693,000 which constitutes one of 
the items which goes to make up the $4,186,314. Now, do those bonds 
draw interest; do you allow for interest on those bonds when you hold 
them in the treasury? 

Mr. Cromwell. These bonds were not continued in the treasury: 
they were canceled on the maturity of the sterling mortgage bond 
issue in 1897. 

Mr. Townsend. Well, you carried them as a part of your assets? 

Mr. Cromwell. Yes, we carried them as a part of the assets until 
the time we canceled them. 

Mr. Townsend. Well, while you were carrying them as a part of 
your assets did you allow them to draw interest? 

Mr. Cromwell. Yes, sir; because these bonds which came into the 
treasury represented earnings which were used to buy the bonds with, 
just as we might buy Government bonds. We had taken our cash in 
the years preceding, and had purchased these bonds instead of buying 
Government bonds, and they remained in our treasury as current 
assets in place of the cash which had been used to purchase them. 
The cash had been derived from the earnings. The company took 
its earnings and bought its own bonds as the best method of investing 
its surplus earnings. These bonds, therefore, were an investment held 
as treasury assets in place of the earnings which had been applied to 
purchase them. Therefore the interest paid upon these bonds was 
properly credited, just as you would credit interest if they were 
Government bonds purchased with the earnings of the company. 
They matured in 1897 and we then canceled them, thus reducing the 
capital indebtedness of the corporation. This is one way we used 
the accumulated earnings. 

Mr. Townsend. Noav, supposing that on November 30, 1904, you 
were to declare a dividend, could you on that showing make a divi¬ 
dend in excess of the cash that you had on hand ? 

Mr. Cromwell. Oh, yes; we could have done so, but did not do so. 

Mr. Townsend. ITotv would you do that, Mr. Cromwell? 

Mr. Cromwell. The question of dividends, as you know, does not 
relate merely to cash that you happen to have in the vault. The divi¬ 
dend is payable out of the fund representing net earnings, net earn¬ 
ings only. Of course you can not pay a dividend out of the proceeds 
of bonds or from the sale of property, or from anything that impairs 
the u corpus ” of the property. The dividend fund is derived from 
the accumulated earnings. Now, we had on November 1, 1896 (not to 
go back too far, but to have a convenient date), in the profit and loss 
account representing accumulated earnings, $587,465.79. 

Mr. Townsend. December 31, 1896? 


56 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Cromwell. Yes. sir. On December 31, 1897, the next year, we 
had $2,713,940.70. Taking up the report for the following year, 
December 31, 1898, you will find we began with an accumulated profit 
of $2,713,920.70. In that year we did not declare any dividend, but 
accumulated our earnings, and at the end of the year 1898 we had a 
balance of $2,971,448.51. The next year, December 31, 1899, we 
started with this balance that I have just mentioned as of December 
31, 1898, to wit, $2,971,448.51. That year we did not pay a dividend, 
but again accumulated our earnings, and at the end of the year had a 
surplus of $3,390,398.94. The succeeding year, December 31. 1900, 
we started with that balance of December 31, 1899 ($3,390,398.94). 
In that year we did not pay a dividend, but again accumulated our 
earnings, and at the end of the year had a surplus of $3,867,831.69. 
You will observe, gentlemen, how this fund was constantly growing. 
The next year, December 31, 1901, we started with that balance of 
$3,867,831.69. In that year we again followed the same practice of 
accumulating our earnings and did not pay a dividend, and the sur¬ 
plus thus grew at the end of that year (1902) to be $4,110,345. In 
the year ending December 31, 1902, we started with the balance of 
$4,110,345, and in that year we paid two dividends, all fixed charges 
and operating expenses of every character, reduced our mortgage 
debt $140,000, and still had a surplus of $4,201,587.09. 

Mr. Townsend. How much was your dividend of that year ? 

Mr. Cromwell. We paid two dividends, amounting to 4 per cent. 
The next year, December 31,1903, we started with said surplus as 
of December 31, 1902, namely, $4,201,587.09. That year we paid 
three dividends, aggregating 8 per cent: paid all fixed charges and 
operating expenses of every character; reduced bonded indebtedness 
$140,000, and still had a surplus of $4,191,929.91. We now come 
down to the year 1904. and I present you a statement prepared by the 
officers in advance of the publication of the annual report, which will 
only come out next April, and which shows that for the eleven months 
of the year 1904, our net earnings are $561,315.95, over and above all 
fixed charges, operating expenses, and reduction of bonded debt 
$140,000. Allusion has been made in some publications to the non¬ 
payment of dividends by the company during the years 1893 to 1900, 
and it has been asserted that the indications were that the company 
was in an unprofitable state. That is a fallacy which those who do 
not know the condition of the company might readily fall into, but 
which it needs only the slightest inspection of the condition of this 
company to show is an error. On the contrary, in 1896, the net earn¬ 
ings were, after bond redemptions, etc., $545,684.53. 

In 1897 they were $409,873.37. In 1898, $266,746.73; in 1899 they 
were $295,231.77; in 1900, $446,764.68, and yet we did not pay divi¬ 
dends during this time as vou see; in 1901, $259,590.12; in 1902, 
$295,384.40: in 1903, $401,068.30; in 1904, for the eleven months, 
$561,315.95. Those are net earnings. The treasurer has prepared 
and I hand you a statement showing this more in detail: 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


57 


Exhibit 6c. 

statement shoicing net earnings , 1806-1904. over and above redemption of bonds, 
payment of all operating expenses , and fixed charges. 


1896 _ 

1897 _ 

1898 _ 

1899 _ 

1900 _ 

1901 _ 

.1902_ 

1903_ 

J904 (11 months)«. 


$545, 684. 53 
409, 873. 37 
266, 746. 73 
295, 231. 77 
446, 764. 68 
259, 590.12 
295, 384. 40 
401, 068. 30 
561, 315. 95 


3, 481, 659. 85 

First-mortgage bonds redeemed_ 981, 000. 00 

November 1, 1904_ 4,462,659.85 

April 1, 1904_ 3,096,601.49 

First-mortgage bonds redeemed_ 981,000.00 

April 1_ 4, 077. 601. 49 


The profit and loss account, which on December 31, 1896, was 
$587,465.79, had to its credit on December 31. 1903, $4,191,9*29.91, 
and on November 30, 1904, $4,578,245.86. This is after the payment 
of all operating expenses, all payments to the Republic of Colombia 
for the concession installment of $250,000 per annum, all dividends 
that were declared during that period; and further, after reducing 
the capital indebtedness of the company to the extent of $981,000 first- 
mortgage bonds. By the provisions of the 44 per cent mortgage 
bond there is the requirement on the part of the company not only to 
pav interest, which of course we do. but also each year to apply 
$17)0,000 as a sinking fund. The company has thus paid, since this 
mortgage was issued in 1897, $981,000 in cash in reduction of that 
$4,000,000 mortgage. And in addition to that has to-day in its treas¬ 
ury $647,000 other of those same bonds. 

Mr. Townsend. What do you mean by the annual sinking-fund 
drawing? 

Mr. Cromwell. By the provisions of the mortgage of 1897, under 
which the 44 per cent bonds were created, there is a requirement that 
the Panama Railroad Company shall deposit with the trustees of that 
mortgage in August of each year $1^0,000 cash to be applied by the 
trustees of that mortgage, after public advertisements, in the redemp¬ 
tion of as many bonds as that sum will realize. That practice has 
been invariably pursued by the company, the money has always been 
paid, and the trustees of that mortgage have publicly advertised for 
bids at, the lowest price. Those offerings have come in almost invaria¬ 
bly at about 104 to 105 per cent, and the money has been applied in 
the retirement and redemption of those bonds and accrued interest; 
and the bonds thus paid, redeemed, and canceled. 

The Chairman. These annual payments that you have been mak¬ 
ing to the Government of Colombia* were consolidated into one lump 
sum for a number of years. You issued the subsidy bonds for that ? 


April 1, $176,257.59. 
























58 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Cromwell. Yes, sir; in 1880. 

The Chairman. When you liquqidate one of tho£e subsidy bonds, or 
purchase one of those bonds, you credited that to the annual accumu¬ 
lation ? 

Mr. Cromwell. No, sir; I am very glad you asked that question, 
because it is a very pertinent one. 

The Chairman. When you paid one of those bonds, or purchased 
one of those bonds, it did not go into the fund called the accumulated 
earnings ? 

Mr. Cromwell. When we paid them off at maturity it went into the 
ordinary operating expense exactly as if we had paid a clerk or any 
other operating expense, because it was a payment of rental. When 
we purchased them out of surplus as a treasury investment it went 
into the profit and loss account. 

The Chairman. Not at any time a credit? 

Mr. Cromwell. No, sir; not bonds paid off. That is a rental ac¬ 
count. 1 would like to have you understand why we did not charge- 
to capital account the subsidy bonds paid off. The subsidy bonds, to 
which you are now referring, were issued in 1880 solely at the request 
of the Government of Colombia to amortize in advance for a period 
of thirty years the annual subsidy payment of $225,000 required to be 
paid directly to Colombia. The annual payment due from this com¬ 
pany of the Government of Colombia under the concession is in the 
nature of a rental charge. 

The Chairman. To be paid out of current earnings? 

Mr. Cromwell. Yes, sir; they were issued for the convenience, and 
for the convenience only, of the Republic of Colombia ; not for money 
received or borrowed by this corporation. The corporation in 1880 
issued and delivered to the Republic of Colombia $3,000,000 of these 
so-called subsidy bonds, or notes (not secured by mortgage), with 
the provision that these bonds should only be redeemable at the rate 
of about $225,000 per annum, to be drawn by lot to that amount; 
the amount thus redeemed annually being no more than the pre¬ 
cise amount which the company was bound to pay to the Government 
of Colombia in pursuance of the provisions of the concession. So 
that it was no increase of the rental subsidy of this company one way 
or the other ; it merely represented the annual payments to fall due 
up to 1908, and enabled Colombia, through the sale of these bonds, to 
get the moneys in advance. It is not. therefore, an obligation of this 
company in the sense that it is for money borrowed. It was a con¬ 
venient form to Colombia for the payment of the subsidy as it fell 
due, from year to year, at the rate of $225,000 per annum. The sub¬ 
sidy bonds represent precisely that amount of annual rental charge 
which this company was under obligation to pay to the Government 
of Colombia annually, up to 1908—no more, no less. The annual 
drawings and payments have occurred from 1880 down to this time, 
and always has been performed with precision and satisfaction. 
The total original issue of $3,000,000 has now, by the annual pay¬ 
ments 1 have described, been reduced to $715,000. This balance of 
bonds run off at the rate of about $225,000 per annum up to 1908. 

The Chairman. How many of these bonds, if any, have been taken 
in and are now in the treasury of the company uncanceled? 

Mr. Cromwell. We have deemed it prudent to invest some of our 
earnings in these bonds. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


59 


The Chairman. How many? 

Mr. Cromwell. We have thus purchased and own $126,000. 

The Chairman. They are held in the treasury of the company? 

Mr. Cromwell. Yes, sir; as a free asset. 

The Chairman. Are they carried in the current assets? 

Mr. Cromwell. They are the free assets purchased with accu¬ 
mulated earnings and are a part of the $4,000,000 surplus fund. 

The Chairman. In that connection that was a charge against the 
current expenses of the company? 

Mr. Cromwell. No, sir; not unless drawn for redemption, for it 
is not due and payable until so drawn. In the meantime it is not due. 
Permit me to make further explanation. Your question is very proper, 
because it brings out the truth. If these $126,000 subsidy bonds rep¬ 
resented a present indebtedness of the company for money had and 
received then we could not carry them in the a ecu: nu hated surplus 
fund. But these subsidy bonds do not represent a present indebted¬ 
ness. They are only evidence of an indebtedness to arise in the future 
and only due by this company when they are drawn at the rate of 
$225,000 per annum as the equivalent of that amount of subsidy or 
rental falling due annually. They are not drawn until the year ends, 
and when the year lapses they are drawn and paid off to the extent of 
$225,000, just exactly the same as that amount of cash would other¬ 
wise, at that identical time, have been payable to Colombia under the 
concessions. We had, for illustration, $312,000 of those bonds which 
we had purchased with the surplus earnings. But while we held 
them in the treasury $186,000 were drawn and paid off. Therefore, 
we paid them, canceled them, and took them out of this $312,000 
investment, because the time had arrived when we were bound to pay 
the $186,000 through the annual drawings. This reduced our invest¬ 
ment to the $126,000 referred to. In respect of these $126,000 we have 
no present obligation to pay them, because the rental charge which 
they were issued to represent is not yet matured—not yet due. 

Mr. Townsend. Then you take care of that in your surplus fund? 

Mr. Cromwell. Take care of that out of accumulated earnings. 
The subsidy bonds never have represented and do not represent a 
present indebtedness or moneys received. Of course they are an obli¬ 
gation of the company; but they are a liability which the company is 
only bound to pay in the manner provided in the bond and for the 
purpose of paying the subsidy rental as it falls due and not otherwise. 
The subsidy bonds represented a rental charge payable annually and 
not otherwise. So that these subsidy bonds, again I say, represent 
only a rental charge upon this property, which subsidy charge has 
rested there since 1867. But I again repeat that the subsidy bonds do 
not represent any money that has ever been received by the company 
in respect of them. They represent precisely what I have said, the 
rental obligation under the concession to Colombia, and it is so grad¬ 
uated in amount of annual payment that the annual drawings of 
$225,000 represents precisely that amount of money which, at the end 
of each succeeding year, we otherwise would be bound to pay to Co¬ 
lombia by check. For their accommodation v 7 e pay the rental by 
drawing this bond, instead of by check. But in dollars and cents it 
does not become an obligation upon this company until the annual 
rental charge falls due and is then discharged in the form of paying 
off the bonds instead of by check. 


60 


INVESTIGATION OF PANAMA KAIL WAY COMPANY. 


Now let us look at the subject of this surplus fund from another 
standpoint. On December 31, 1901, the accumulated net earnings of 
the company were $4,110,345. I ask you, gentlemen, to kindly follow 
me with the annual report for 1902. The first year succeeding that 
balance—and I shall try to make this subject as clear as a simple rule 
of arithmetic—on December 31, 1901, balance of surplus account 
was $4,110,335. During the next year, 1902, what did we make? In 
that year we earned $435,384. Out of which we reduced our capital 
indebtedness by bdying, redeeming, and canceling $140,000 of our 44 
per cent bonds. 

In that year it paid a 4 per cent dividend of $280,000. You will 
observe therefore that the dividend of $280,000 was less than the net 
profit of $295,000, after reducing the mortgage debt $140,000. Thus it 
brings us at- the end of that year to a balance of profit and loss account 
of $4,201,587.09, which, after paying the dividend and further reduc¬ 
ing the mortgage debt $140,000, still left us at the end of the year 1902 
a larger balance in the fund than we had at the end of the year 1901. 
We now come to December 31, 1903. That year we started, as I have 
just shown, with a balance $4,201,587.09, which I again observe was 
more than we had the year before after payment of dividends during 
that year, and after reducing our mortgage debt $140,000. We paid 
three dividends, aggregating 8 per cent in that year, but after pay¬ 
ing those dividends and reducing our bonded indebtedness during the 
year $140,000 more, we still had at the end of the year a surplus of 
$4,191,921.91, being larger than we had December 31, 1901, when it 
was $4,110,345. 

Now. coming down to April 1, 1904, the officers report that the net 
earnings from December 31, 1903, to April 1, 1904, were $176,257.59 
over and above all fixed charges and operating expenses. 

The Chairman. Were the Commissioners members of the board of 
directors at that time? 

Mr. Cromwell. No, sir; because the United States had not received 
the stock at that time. 

Adding, therefore, to the surplus of December 31, 1903 (which was 
$4,191,929.91), the earnings up to April 1. 1904, $176,257.59, you have 
a total of $4,368,187.50. 

And after the payment of the dividend of 24 per cent declared 
out of accumulated earnings up to April 1. 1904, and paid on May 3, 
1904, $175,000, Ave still have a surplus fund larger than that of 
December 31. 1901, to wit, $4,193,187.50, as against $4,110,345 Decem¬ 
ber 31, 1890. The dividends paid in 1902. 1903, and the spring of 
1904, amounted altogether to 144 per cent, namely, $1,015,000; so 
that between December 31, 1901. and May, 1904, the total amount 
paid in dividends was but $1,015,000. Now, putting aside entirely' 
the question of the accumulated earnings fund of over $4,000,000, 
every item of which is on the books before you to be examined at 
your pleasure. 

It should be borne in mind that this balance of surplus fund is after 
(and not before) payment of dividends during the same period. The 
dividends from 1896-1904 amounted to $1,155,000, so that the surplus 
fund was over $5.000,000—the net, after dividends, beinsr over 
$4,000,000. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


61 


Between 1896 and April 1 . 1904, tlie net earnings (as per Ex¬ 
hibit 6 c) amounted to_ 

Of which there was applied for first mortgage bonds 

redeemed --- .$981,000 

And dividends_I 155 qoq 


$4, 077, 601. 49 


2,136, 000 . 00 


A 01 earnings- 1,941,601.49 

I hus the earnings for these eight and a quarter years were suffi¬ 
cient to pay the dividends thrice over, independent of prior accumu¬ 
lations. 

Putting aside entirely the fact that there was this $4,000,000 sur¬ 
plus fund, and addressing our minds solely to the question of what 
were the earnings of this company during the same period, December 
31. 1901, to April, 1904, we also find something of interest. 

1 or 1902 our net earnings over and above operating expenses, includ¬ 
ing the $250,000 to Colombia, were $435,345. In the next year, 1903, 
they were on the same basis $541,068; and for the first quarter of 
1904 (April 1) the net earnings of this company were, on the same 
basis, $176,257. which you will see makes $1,152,670, "which is in 
excess of the dividends paid within the same period ($1,015,000) and 
quite independent of the fact that we had nearly $4,000,000 more in 
the surplus fund. These net earnings of $1,152^670 went, of course, 
into the treasury of the company, subject to the uses of the corpora¬ 
tion, as any other net earnings would be subject. 

The Chairman. Now, going back to that $4,000,000 of bonds; 
when was that first issued? 

Mr. Cromwell. You mean the mortgage? 

The Chairman. Yes. 

Mr. Cromwell. In 1897. 

The Chairman. They were mortgage bonds? 

Mr. Cromwell. Yes, sir. 

The Chairman. How long were they to run? 

Mr. Cromwell. Twenty years. 

The Chairman. Whose indebtedness was that? 

Mr. Cromwell. This corporation ; the Panama Railroad Company. 

The Chairman. Who was bound for their payment? 

Mr. Cromwell. The Panama Railroad Company. 

The Chairman. How r could a railroad pay its bonded debt, except 
by marketing its capital or by appropriating its gross earnings? 

Mr. Cromwell. It could not, except one way or the other. That 
statement is correct, but a dividend fund is entirely independent 
of the question of indebtedness or obligations of the company. 

The Chairman. It is a kind of a process of watering stock. 

Mr. Cromwell. Of course the relation to the corporation of a 
stockholder is entirely different from the relation of a creditor to 
the company. There is a fundamental difference between the legal 
status of the two interests. 

The Chairman. That is the point I was unable to see. You and 
I differ as to the relationship a stockholder bears to the corporation. 

Mr. Cromwell. The universal rule, T think, is that the stockholder 
is entitled to have the net earnings of the company treated as a divi¬ 
dend fund, subject of course to the discretionary use thereof by the 
board of directors for the current needs of the corporation. 







62 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Esch. There is one feature of this investigation that is per¬ 
tinent just now, Mr. Cromwell, and that is the securing of control 
of the outstanding stock of the railroad company. 

Mr. Cromwell. That is, indeed, a very important question. 

Mr. Esch. We would like to get what information we can as to the 
best method in which that shall be obtained. You probably remem¬ 
ber that Secretary Taft has made two recommendations, either 
acquisition of the stock, or, secondly, the lease of the railroad by 
the Panama Canal Commission. Have you any suggestions to make 
as to either remedy? You, perhaps, know that a bill has already 
been recommended from the committee, and a discussion has already 
been commenced in the House on a bill to condemn the outstanding 
stock. 

Mr. Cromwell. 1 do, sir. 

Mr. Esch. We want to know, if you feel free to express your opin¬ 
ion, as to what would be the best method for the Government to get 
absolute control ; or whether it could be done in another way ? 

Mr. Cromwell. I am in entire sympathy with the Government 
upon this subject, and am aiding it. I consider it to the interest of 
the United States to acquire ownership of all the capital stock of this 
company, and I also consider it to the interest of the small minority to 
dispose of their holdings at par and be relieved of the uncertainties 
of their investment. In my judgment the Panama Railroad Company 
should be maintained as a separate corporation, whether or not its 
management be reduced in force. It has a valuable charter, a special 
charter granted by the State of New York in 1849; one of the very 
few charters in the United States which permits a domestic corpora¬ 
tion to own and operate a railroad in a foreign country. This charter 
gives that power. It also gives power to operate a steamship line 
in connection with the railroad line. The Panama Railroad Com¬ 
pany also owns a most valuable concession granted by Colombia, 
officially recognized by the Republic of Panama, and having about 
sixty years yet to run. This concession covers privileges and grants 
of enormous benefit to the corporation, and consequently to its stock¬ 
holders—not only from a material point of view, but for national 
strategic reasons. I esteem it of high consequence to the United 
States that the legal entity of the Panama Railroad Company be main¬ 
tained, and that the concession be preserved in its original integrity. 
In my opinion the concession to the Panama Railroad Company con¬ 
fers grants, rights, and privileges other than the grants, rights, and 
privileges covered by the treaty between Panama and the United 
States. I need hardly remind you that the treaty between the United 
States and Panama relates principally to the construction of a canal, 
and incidentally to all auxiliary works, including this railroad. The 
primary purpose was the construction of a canal- The concessions made 
directly to, and owned by, the Panama Railroad, however, were unaf¬ 
fected by that treaty, so far as this corporation is concerned, as this 
corporation is not a party to that treaty. Therefore, this company 
holds still, in original virtue and force, all the rights, grants, and 
privileges of the concession granted to the Panama Railroad Com¬ 
pany, and which concession is still existing. The company has main¬ 
tained the concession with scrupulous care, and has fulfilled its obli¬ 
gation under it. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


63 


T am not referring - to the precise method or form in which the 
operations of this company should he continued. I think, if the 
Government owned all the stock the management could he made 
with a reduced board of directors, and other simplifications; but T 
am emphasizing the view that the corporate entity and existence of 
the Panama Railroad Company should be preserved. As to how 
operations should be conducted under Government ownership T am 
not venturing to make a remark. File board of directors will decide 
that in the future. I am addressing myself solely to the question of 
preserving its corporate entity and existence, and not annihilating 
that, even under Government ownership of all the stock. I esteem it. 
then, of the highest interest to the United States to acquire all of the 
outstanding capital stock as the first choice of methods. The amount 
of stock owned by the United States to-day is 68,988 shares, which 
leaves in the hands of the public only 1,01*2 shares. AYe delivered to 
the United States, for the Xew Panama Canal Company, upon the 
closing of the Panama Canal transfer, 68,887 shares. * Since that 
time the United States Government, through the Isthmian Canal 
Commission, has purchased 101 shares. Those 101 shares were pur¬ 
chased with the money of the United States, and the stock stands in 
the name of the officers of the United States. There need be no con¬ 
fusion on that point. Xow, as to the 1,012 shares—these are owned 
by over 50 parties living in the United States, in France, and in Eng¬ 


land, and the holdings are in general in small amounts. An accu¬ 
rate list, from the company's records, of the holders of these 1,012 
shares has been presented to you by the executive officers of this com¬ 
pany. This list is a correct transcript from the books of the com¬ 
pany. and I believe that the stock is owned by the persons who are 
there mentioned, with hardly any exception. In answer to your ques¬ 
tion I should state that 1 have been charged by the President and 
Secretary of War with the task of endeavoring to secure this out¬ 
standing stock, and have addressed to the stockholders a communica¬ 
tion, which you probably have seen in the daily papers, and of which 
I hand you a copy. 


Exhibit B. 


45) and el Wall Street. 

Xcic York, January 17, lUO"). 

To stockholders of lHe Panama Railroad Company: 

In connection with the consummation of the transfer by the Xew Panama 
Canal Company to the United States, which included about 1)84 per cent of the 
capital stock of the Panama Railroad Company, the President of the United 
States and the Secretary of War have authorized me to afford the outstanding 
minority interest an opportunity to realize upon their holdings. 

The isthmian Canal Commission, in their official reports to the President, 
valued the capital stock at $7,000,000, its par value (which comprehended 
allowance for all bonded indebtedness and other obligations having priority in 
liquidation). 

Accordingly, you are hereby offered until the 23d day of February, 1905, the 
privilege of selling and transferring to the United States of America your hold¬ 
ings of the capital stock of the Panama Railroad Company at the par value 
thereof, payable in United States gold coin, upon compliance with the following 
conditions: 

(a) Any dividend, up to 5 per centum, in the meantime declared by the com¬ 
pany, shall belong to the selling stockholder. 

(/>) The shares to be duly assigned, with seal affixed, by the registered stock¬ 
holder to “ William II. Taft, Secretary of War of the United States” (either by 


64 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


execution of the form of assignment engraved upon the hack of the certificates 
therefor or by similar separate stock-transfer forms). 

The assignment by the stockholder to be witnessed by two responsible persons, 
with their addresses and occupations added (not necessarily a notary or other 
official). 

(c) In the cases of estates, trusts, guardianships, bankruptcies, or other 
fiduciary relations, satisfactory documentary and official evidence to be fur¬ 
nished of the title of the signatory parties and of their power to transfer. 

( d ) The certificates for shares so assigned to be delivered to The Bankers’ 
Trust Company, No. 7 Wall street. New York City. United States of America. 

( e ) Payment will be made by said trust company, as my agent, upon such 
assignment, execution, and delivery. 

I advise all minority stockholders to avail of this opportunity, which will 
expire at the time mentioned, after which date certain legal proceedings are 
contemplated to be taken. 

Wm. Nelson Cromwell, 

General Counsel. 

Under this offering stock is being presented to me. Already I have 
acquired for the Government a substantial .amount, which at my direc¬ 
tion has been assigned to the Secretary of War and is owned by the 
United States, although not yet presented to the Panama Railroad 
Company for transfer. I shall pursue this effort until another stage in 
the work is reached. If the stock can be acquired under my offer, it 
will solve the problem and answer the question you, Mr. Esch, have 
asked me. But let us assume that all the stock can not thus be 
acquired. 

Mr. Escii. That is the point. 

Mr. Cromwell. We shall then be brought to consider some other 
solution of the problem. In my judgment that is found in the meas¬ 
ure recommended by your committee, namely, the act authorizing the 
condemnation of the stock for the public use. It can not be done in 
this case by a State law; it must be by an act of Congress authorizing 
the condemnation of the stock for public use. I recognize that this is 
an unusual proceeding and one which at first rather startles the mind, 
but 1 consider that there is ample legal warrant for it. It is based 
upon the existence of a public necessity for the United States to ac¬ 
quire the shares—the national interests involved in the execution of a 
national public work. The analogy will be found in the condemna¬ 
tion of land for any other public use, such as a post-office, custom¬ 
house, or any other public work. Assuming the public need (and that 
is demonstrable, for the absolute control of the railroad is a necessity 
in canal construction) I see nothing in principle against the con¬ 
demnation of personal property, to wit, shares, as well as of real prop¬ 
erty for such public use. 

Mr. Esch. Of course that is a very great power. You are aware 
of the decision of the supreme court of the State of Massachusetts? 

Mr. Cromwell. I am. and of a decision in Connecticut. The prin¬ 
ciple has found application in other corporate topics even when no 
public interest was involved. For instance, in the State acts permit¬ 
ting consolidation of railroads it is quite common to find provision 
that consolidation may be effected and the title to the property trans¬ 
ferred in absolute ownership with the approval of the owners of a 
proportion less than the whole of the capital stock, say two-thirds in 
amount, and with the provision that the minority stock be appraised 
by judicial methods, its value thus determined, and paid for by the 
consolidated interest. That is equivalent to condemnation. 


INVESTIGATION OF PANAMA KAILWAY COMPANY. 


65 


Mr. Esch. That is provided for in the bill as proposed by this com¬ 
mittee you are aware? 

Mr. Cromwell. Yes, sir. So, too, in some States you have doubt¬ 
less found there are statutes permitting the leasing of the property 
of one corporation to another, and giving the power to lease with the 
consent of the owners of an amount in interest less than the whole. 
The minority stock is appraised, valued, and paid for. and is thereby 
required, to be surrendered and canceled. 

Mr. Esch. Do you think that would be a wiser method than to put 
the stock in escrow ? 

Mr. Cromwell. What do you mean by escrow, sir? 

Mr. Esch. Of course some of those outstanding stockholders may 
not consent, but they might put their stock in the hands of some 
trustee, for instance, and then accept the ordinary dividends and so 
on, and give the Government full control in that way. 

Mr.. Cromwell. That, of course, presupposes the assent of that 
stockholder. A ou mean that stockholders who would not be willing 
to sell the right might be willing to maintain community of interest 
in the company, and accept, as you have suggested, a fixed annual 
return upon the stock. 

Mr. Esch. That is the idea. 

Mr. Cromwell. I do not think that would be advisable. 

The Chairman. Is it your opinion that most of this stock can be 
reached by negotiation ? 

Mr. Cromwell. I think that most of it can be. Statutory power 
to appropriate for public use the outstanding stock is, however, advis¬ 
able, because there will undoubtedly be some shares lost or held by 
parties indifferent because of very small holdings or otherwise. 

Mr. Esch. We get service by publication; that is provided for in 
the bill. 

Mr. Cromwell. Another method which might be considered is pro¬ 
ceedings to dissolve the Panama Railroad Company under the 
statutes of the State of New York. This is a corporation of that 
State, and of course on the subject of dissolution would be governed 
by the laws of that State. In brief, the laws of the State of New 
York provide that the corporation may be dissolved by the court 
upon the petition of the board of directors. The consent of stock¬ 
holders is not required. In place of such consent there is substituted 
the judgment of the court. In the State of New York it is the 
supreme court that is given jurisdiction of this proceeding. When¬ 
ever the board of directors consider that it is to the best interests of 
all the stockholders to terminate the existence of the company and to 
wind up its affairs, they may present to the supreme court of the 
State of New York a petition setting forth the grounds for the dis¬ 
solution and exhibiting the assets and liabilities of the corporation, 
making a complete expose of its condition. Notice of that applica¬ 
tion must be given to all the creditors and all the stockholders of 
the company by publication, etc. A date is fixed by the court for 
the hearing upon that application. The board of directors pre¬ 
sent the affirmative. Any stockholder or creditor, if he desires, will 
be heard in the negative, and upon fidl hearing the court gives judg¬ 
ment. If it decrees dissolution (grants the petition of the directors) 
then it may appoint or dispense with the appointment of a receiver 


PAN RY— 05- 


66 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


(in its discretion) to sell out, liquidate, and wind up the affairs of 
the company. That course being followed, either through the medium 
of a receiver or board of directors acting as trustees for the pur¬ 
pose, the final result is a sale and disposition of all the concessions 
and other property of the company, a marshaling of all the liabilities 
and assets, and the complete liquidation of the affairs of the corpora¬ 
tion. Now we must assume that this course would not be adopted 
unless the United States intended to become a purchaser of the prop¬ 
erty at a sale under such proceeding. In this case the mortgage 
bonds could be retired at a small premium of 5 per cent, as there is 
provision in the mortgage to this effect. 

Mr. Townsend. It would have to be a public sale? 

Mr. Cromwell. A public sale. 

Mr. Esch. In that connection you made a very favorable showing 
for the company in the last three or four years. That would have an 
effect upon the stock valuation. Have you had any difficulty in get¬ 
ting or purchasing some of this outstanding stock by reason of the 
high valuation of it? 

Mr. Cromwell. I consider it to the interest of such a small min¬ 
ority to realize par upon their holdings, in view of the uncertainty 
of a fixed income return, the absence of any market, their unavail¬ 
ability as an asset in business transactions, the inevitable effects upon 
the railroad of the opening of the canal to commerce. To meet the 
enormous business of canal construction it will be advisable to largely 
increase rolling stock and equipment, enlarge terminal facilities, 
and perhaps double track the road. This will absorb the cash 
resources of the company. I think stockholders will agree with me 
in this view. 

Mr. Esch. You said that it was wise to maintain the corporate 
integrity of the Panama Railroad Company. If the Government 
secures control of this stock, how will you reconcile Government con¬ 
trol and corporate integrity? 

Mr. Cromwell. The United States can as well own all the stock 
as they can own 99 per cent, and still maintain the corporate integrity 
As I have said, the board of directors can be reduced in number and 
corporate management can be made as simple as desired—under 
Government ownership of the stock. 

Mr. Esch. You do not anticipate that relationship will arouse any 
trouble or difficulty? 

Mr. Cromwell. None whatever. There is no reason why the 
United States Government may not maintain the corporate entity 
with 100 per cent as it does now with 99 per cent. 

Mr. Esch. That would imply separate control. 

Mr. Cromwell. It means that this asset of the Government would 
be managed by the Government as a separate entity, that is all. 
Otherwise it would be necessary for the Government to provide at 
once the cash to pay off all bonds, etc., and itself become directly 
responsible for the management of the business—I mean directly 
liable for daily operations, traffic contracts, railroad accidents, etc. 

Mr. Esch. I understand your position. 

Mr. Lovering. When you say you advocate maintenance of the 
legal integrity of the Panama Railroad Company, do you include in 
that the entire organization, including the steamship lines? 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


67 


Mr. Cromwell. I will present my views in a few words. My 
opinion is: (1) That the corporate entity of the Panama Railroad 
Company should be preserved, for the reasons I have given in answer 
to the committee’s questions. The corporate organization can be 
simplified under Government control, and yet the advantages I have 
pointed out can be preserved. 

(2) 1 hat it is to the best interest of the United States to maintain 
and operate its New York-Colon Steamship Line, in addition to its 
earning power and its relation as a reliable feeder to the railroad, the 
Atlantic Line is an instrumentality of inestimable material and stra¬ 
tegic value to the Government in the construction, operation, mainte¬ 
nance, and protection of the canal, both during and subsequent to 
completion of the canal. It insures the quick, certain, and regular 
delivery of the vast amount of construction material and other sup¬ 
plies, and it frees the Government from the power of contractors or 
any combination, imposition, or inefficiency of others. It will save 
the Government millions of dollars and much valuable time in con¬ 
struction. Moreover, in my judgment, the national interest demands 
the ownership and operation of its own line to its canal possessions. 
It should not be dependent upon any other party for quick, certain, 
and satisfactory communication to and from the point where it has 
such a stupendous investment and which it has become morally obli¬ 
gated to the world to maintain and protect. As the conservator of 
the greatest material factor of civilization, sound statesmanship 
demands the very best—the most reliable—and the quickest means of 
communication with the possessions 2,000 miles distant, and with 
which our fortunes and honor are forever bound. 

(3) That the steamship and accounting departments can be more 
efficiently, promptly, profitably, and satisfactorily regulated and 
managed from New York as the headquarters; but that under com¬ 
plete Government ownership the corporate organization can be sim¬ 
plified and officials of the Government, already on its pay rolls can be 
economically utilized to a certain extent. 

(4) That while the Pacific Mail contract is a profitable one, and it 
wmuld not, under private ownership, be good business policy to leave 
a certainty for an uncertainty, or to surrender assured profits to try 
new experiments, yet that under Government ownership the proper 
policy is to avoid traffic contracts of an exclusive character. That 
while this policy is being pursued it is also a duty to the public 
interest that an equally good substitute be found. Otherwise the 
splendid present business will be seriously crippled and loss ensue. 
Instead of relying upon hopes, conjectures, and theories as to the cer¬ 
tainty of such a substitute, the subject should be brought out of the 
clouds and put to a practical test and a workable result reached. I 
intend to urge this course upon the board, so that the new situation 
shall be met the best it may. We all, surety, have the heartiest dispo¬ 
sition to master the problem.- 

The Chairman. If we were to part with the ships that are now 
operating in connection with the railroad would it increase or decrease 
our annual net earnings? 

Mr. Cromwell. I think it would decrease them. 

The Chairman. Very largely? 

Mr. Cromwell. Very largely. Entering upon that aspect of the 
question only very briefly, I am speaking now not only as counsel of 


68 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


the corporation, which I have been for many years, but as a member 
of the board of directors and executive committee, in which I have sat 
for many years. Every one of these problems of transportation have 
taxed the care and ingenuity of us all for years. We have been all 
through this question. It is now for the first time coming, and very 
properly, to you gentlemen. We have lived through it for years. We 
have lived through the period of what might be called the “ open- 
door ” policy, throwing down our advantages and opening the Isthmus 
to the world upon like terms. We have tried that and we lost heavily. 
This is a business corporation, not an eleemosynary one. This is a 
splendid business organization. We recognized that we had been 
intrusted with the care of millions of property upon which we must 
make earnings. We recognized that we had no right to abandon the 
property and leave it open to rival steamship or transcontinental lines 
to take the earnings. In our effort to reach the best result, we in 
former years tried the open-door policy. We lost hundreds of thou¬ 
sands off dollars in that experience. Upon another occasion, and 
in response to the clamorous demand of the merchants of the Pacific 
coast (against what they considered great exactions of the great trans¬ 
continental railroads), we made an alliance with the merchants of San 
Francisco in the establishment of an independent line—independent 
of the Pacific Mail, independent of all associations other than with 
the shipping merchants of San Francisco. No interest or right could 
possibly be more active, more interested, more aggressive, than the 
shippers of San Francisco. They formed a corporation in 1893-94, 
under the laws of California, based upon subscriptions by merchants 
of the city to stock of that company. It was almost in the nature of 
a public-spirited subscription, a subscription moved by their resent¬ 
ment against the transcontinental lines and actuated by active public 
spirit and keen interest. The Panama Railroad Company made con¬ 
tracts with that California corporation. It dismissed the Pacific Mail 
entirely—opened war on them. That alliance with the merchants of 
San Francisco continued for a year and a half. Its result was disas¬ 
trous to them and to us. , The merchants struggled against the situa¬ 
tion. but the result was that they lost all their capital invested and 
much more, aggregating, I understand, from three to four hundred 
thousand dollars, and they had to throw up the contract with us. In 
desperation, our company, being left without a Pacific coast connec¬ 
tion in mid-season, was compelled to continue the line itself. Having 
ourselves no steamers on the Pacific, we had to charter them at large 
cost. This we did, and we continued for our own account the line 
abandoned by the San Francisco merchants. With all our efforts this 
company sunk several hundred thousand dollars in that experiment; 
and it was the lesson of that experience that led us to make a new con¬ 
tract with the Pacific Mail Steamship Company. We made that con¬ 
tract with the Pacific Mail Company in 1895. The contract expired 
in 1900, and was not then renewed by this company, for there had 
been presented to us earnest demands by South American steamship 
lines and others for the termination of the exclusive privilege and the 
introduction of the open-door policy. After months of study, the 
board determined to give the open-door policy a serious trial! We 
refused, therefore, to renew the contract with the Pacific Mail. It 
led to much bitterness of feeling, as we absolutely terminated relations 
of every kind with that company, and for one year and a half we had 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


69 


no connection with them. During that time we seriously and con¬ 
scientiously practiced the open-door policy, encouraging business, of 
course, in the most active fashion, and made agreements with the 
Pacific Steam Navigation Company, a British corporation, and the 
South American Steamship Company, otherwise known as the Chilean 
Line. They undertook the business, but again it was found an unfor¬ 
tunate experience. We did not attain the results we hoped for, nor 
did they, and the obvious facts made it plain that that method of busi¬ 
ness was unsatisfactory and unprofitable to all parties. After that 
experience we considered again the resumption of relations with the 
Pacific Mail Company, and negotiations were opened, continued for 
months, and finally ended in the present contract of June 11, 1902. 

The Chairman. A contract still in force? 

Mr. Cromwell. Still existing; but we have given the six months’ 
notice of termination. That contract has thus far proven satisfactory 
from a business point of view. The company has a joint business— 
railroad and steamship. For bookkeeping and accounting purposes 
we divide the profits, as all railroads divide their business, between 
the several departments. It is of no consequence to the company 
whether the earnings go into one pocket or the other. They go into 
the common pot, and all expenses are paid from the common pot; the 
results are common. 

Mr. Townsend. But you keep them so as to determine- 

Mr. Cromwell. Mainly for the purpose of being able to determine, 
as far as we can, whether the several departments are conducted at a 
profit or at a loss. 

Mr. Townsend. You know whether it is profitable or not? 

Mr. Cromwell. Practically; yes, sir. But upon this topic I say 
that whether the railroad or the steamship department is profitable 
is a matter purely of business judgment. Bear in mind that this 
railroad is only 47 miles long. It is common sense that you could not 
operate a railroad 47 miles long and realize upon it sufficient moneys 
to pay operating expenses, $250,000 per annum to Panama, the other 
fixed charges, and a fair dividend on the investment. For fifty-five 
years the managers of the company have thought differently, and they 
have managed this company successfully. The Atlantic Steamship 
Line is the feeder to the railroad line and insures it a reliable and 
profitable business; it frees the railroad from the vicissitudes, uncer- 
tanties, and fluctuations incident to dependence upon others. We 
have contracts with European lines that have continued satisfactorily 
for forty years. 

Mr. Esch. Still in force? . . 

Mr. Cromwell. Every one of these; yes. There is a large busi¬ 
ness flowing from European ports. Please notice this map [exhibit¬ 
ing map]. You see that from Hamburg there is a line contributing 
directly to Colon; another line from Havre, another line from South¬ 
ampton, another line from Liverpool, Glasgow, Antwerp—altogether 
10 lines converging at Colon, and pouring in their business at that 
point: and they have been doing so from thirty to forty years. Do 
you want to lose it or impair it? We have lines on the Pacific side 
that have contributed in the same way to the business from that end 

for many years. _ .. 

The Chairman. Linked m a great many long lines. 



70 


INVESTIGATION OF PANAMA RAILWAY COMPANY 


Mr. Cromwell. It not only owns the railroad, which is a splendid 
piece of property. 

Mr. Drake. You can go from one end to the other in an hour, if 
need be. 

Mr. Cromwell. It owns the right of way, of great value to-day; 
owns good terminals at each end: it owns practically the whole town 
of Colon. 

Mr. Drake. The ground it is built on ? 

Mr. Cromwell. With a small exception all of the land of Colon is 
owned in fee simple by the Panama Railroad Company. It owns 
one-half of the islands of Flamenco, Naos, Culebra, and Perico by 
title deed. 

The Chairman. Who owns the other half ? 

Mr. Cromwell. The Pacific Mail Steamship Company. 

The Chairman. That is, an undivided half? 

Mr. Cromwell. An undivided half. It owns blocks of land with 
buildings thereon in the very heart of Panama city, independent of 
the concession ar}^ lands. 

Mr. Esch. What is the width of the right of way? 

Mr. Cromwell. We have a full right of way and the right to 
double track our line. We have the right, under our concession, of 
condemnation of lands, so that there is no limitation to the growth of 
the Panama Railroad on the Isthmus of Panama for all purposes of 
its business. It has been declared by Colombia (Panama) an enter¬ 
prise of public utility. 

Mr. Lovering. Has this contract with the Pacific Mail Company 
had the effect to put up the price of transcontinental traffic? 

Mr. Cromwell. On the contrary it has had the effect of loAvering it. 
The Panama Railroad is the only influence that diminishes the trans¬ 
continental rates, for it is the only regulator of the rates of transcon¬ 
tinental lines on loAv-class freight. 

Mr. Simmons. Absolutely. 

Mr. Cromavell. The Panama Railroad also OAvns three steamships,. 
tAvo of which have been brought by recent reconstruction to the high¬ 
est degree of efficiency and usefulness, and adapted especially to this 
trade. It OAvns the finest pier on the South American continent, 
costing $2,250,000. It also OAvns a fleet of 22 lighters, which are 
employed in the Bay of Panama. It has, as I haA^e mentioned ? 
established connections vvith nine or ten lines running to all points 
of Europe, and with three or four lines tributary to the Pacific side. 
The only mortgage indebtedness held by the public* upon all this 
property is a balance of $2,,372,000. That is all, a mortgage small in 
amount in comparison with the value of this property. It has no 
floating indebtedness, and Ave never know such a thing as a promis¬ 
sory note in the business of the corporation. This company never 
borroAvs. It is always a lender of money. There has not been a day 
in many years Avhen the company has not been a lender of money. 
There has not been a day in many years when Ave oAved, currently, 
anything but a trifling amount for current accounts, or for these 
permanent improvements, since paid for with the bonds. The bal¬ 
ances in the bank are hardly ever less than half a million dollars, and 
are so this minute after payment of our dividend of $350,000 last 
week. And in addition to this Ave have bonds in our treasury to the 
amount of $773,000 representing past earnings. The Panama Rail- 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 71 

road Compan} 7 has never ceased operation one minute since it began 
fifty years ago. It has never defaulted in the payment of a dollar, a 
record which I think we have a right to view with pride, and which 
hardly has a parallel in the history of American railroads. 

Mr. Townsend. To what extent is it encumbered with passes? 

Mr. Cromwell. The subject of passes has always been a very per¬ 
plexing one. Under the concession from Colombia, to which I have re¬ 
ferred, the company was obligated to transport gratuitously all troops, 
officers, and officials of the Government. That was one of the terms 
upon which the concession was obtained. These classes constitute the 
bulk of the free passes. There are about 26 other passes called 
u land passes,” which are issued to parties who granted the right of 
way in 1850 and in connection therewith. Of course the local officers 
of the company issue ordinary trip passes for special purposes, such 
as to the ministers and consuls of foreign governments residing there, 
clergymen, dignitaries, and agents of steamship lines who give us 
their business. Those courtesies are extended to those with whom we 
have serious business or diplomatic interests. 

Mr. Esch. How about the army, the Colombian army ? The 
Panama army of course does not amount to anything. 

Mr. Cromwell. At this time, no. It has been disbanded. I wish 
to say that the subject of passes has been recently examined afresh 
very carefully. It is a very delicate subject, a subject which must be 
dealt with very wisely and honorably, because the recipients are men 
of importance in the community and it is of consequence that we do 
not manifest an unusual attitude in railroad practice, and further¬ 
more that we observe the obligations of the concession. The passes 
have recently been very much reduced in number. The subject of the 
issuance of passes of course lies more directly in the jurisdiction of 
the local officers on the Isthmus. No passes are issued from this office. 
The general superintendent is charged with the duty and power to 
deal with that subject locally, with dile regard to our concession and 
the best interests of the corporation, treating its affairs in a broad 
spirit and bearing in mind that it is a concessionary road. Under the 
treaty with Panama, the present treaty, there is provision respecting 
the transportation of its officers and employees. The local officers 
are charged with the duty of very rigid scrutiny and the issuance to 
the smallest number consistent with concessionary duties, good busi¬ 
ness, and the best interests of the company. Have I answered fully? 

Mr. Townsend. Yes. 

Mr. Esch. With each year’s work on the canal, there would tend to 
be a depreciation of the railroad property, would there not? When 
the canal is finally completed, the railway line would be devoted 
almost wholly to local traffic ? 

Mr. Cromwell. That is a very interesting question, Mr. Esch, and 
one upon which traffic men differ. I have given considerable thought 
to it. I do not share the opinion that the Panama Railroad will 
become valueless at that time. No man can judge what will be the 
conditions ten vears hence, with the new traffic element (the canal) 
as a practical thing before it—not a theory, as to-day. The railroad 
will probably then be operated by electric power generated at the 
Gamboa Dam, or one of the other great water-power points. Elec¬ 
tricity will be inexpensively produced on the line of the canal by 
water power, and the railroad may be operated in that way, thus 


72 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

greatly reducing the cost of operation. At that time, too, we will 
have paid off this first mortgage out of earnings and our fixed charge 
will thus be reduced; the local business will be active, and Panama 
and Colon will be far more important than they are to-day. Nearly 
every passenger approaching the canal by steamer will disembark at 
one or the other termini, Panama or Colon, and, taking the quick 
railroad transit across the Isthmus, in less than an hour, will visit 
the cities and observe the interesting sights during the day, while the 
steamer is passing through the canal. The steamer will enter the 
canal at sunrise at Colon, say, and will make its exit at Panama at 
sunset, and the passenger, in the meantime, will have passed over by 
the electric railroad and be amusing himself in either city while the 
steamer is moving through the canal. The local traffic will have 
grown to importance; the country will have developed; business will 
have sprung up along the line of the road, furnishing local traffic. 
There will be freight coming to either terminal, but not passing 
through the canal at all, and which could not afford the tolls which 
must be charged to operate the canal; and cargo of vessels which will 
not have a sufficient freight to justify them in passing through the 
canal, or having cargo destined to a point not justifying canal transit. 
Therefore, such freight will have to be transported over the railroad 
and take ship at the other point, thus saving the heavy toll between. 
Again, there will be business naturally tributary to either termini up 
and down the coast, employing an entirely different class of shipping, 
of very light tonnage. 

Mr. Esch. I ought to know, but what will we have to pay Panama 
for the right of way? 

Mr. Cromwell. Nothing. Except for one or two small claims, 
the Panama Railroad owns its entire right of way; has no obligations 
to pay either to Panama or Colombia in respect of it. 

Mr. Escii. What relationship does our Government sustain to the 
railroad company on freight shipped over the line for use on the 
canal ? Do we get a special rate, or is the Government of the United 
States charged the regular rate? 

Mr. Cromwell. We have a special rate, as the traffic officers will 
give you more in detail. The United States rates in no case are 
higher than those to the public, and in some cases are lower, where, 
by reason of larger quantity, it is justifiable for the company to 
make lower rates. 

Mr. Esch. Was the New French Panama Canal Company given 
a like rate? 

Mr. Cromwell. You are now referring to the period of 1883, 
1884, or 1885. That, of course, is long before our time. I think 
not; 1 no, sir; they were not. On the contrary, the railroad company 
was given higher rates. 

Mr. Townsend. I think, as Mr. Esch has suggested, there is a 
good deal of this testimony that we want, that you could tell us as 
well in Washington. 

Mr. Cromwell. Yes, sir. 

Mr. Esch. I would like to ask some questions of Mr. Drake in 
regard to the books. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


73 


STATEMENT OF E. A. DRAKE. 

Mr. Townsend. Mr. Drake, you are the vice-president and secretary 
of this company ? 

Mr. Drake. Yes, sir. 

Mr. Townsend. How long have you occupied that position ? 

Mr. Drake. As second vice-president and secretary for three years; 
as vice-president and secretary since September, 1904. 

Mr. Townsend. How long have you been connected with the Pan¬ 
ama Railroad Company ? 

Mr. Drake. Since April, 1888, in various capacities, beginning as 
a director, then as assistant secretary, then as secretary, then as assist¬ 
ant general manager and secretary, and then as second vice-president 
and secretary, and now as vice-president and secretary. I succeeded 
Mr. Whaley, who for a Jong time was the active vice-president and 
general manager of the corporation for a number of years, living in 
New York and visiting the Isthmus several times. Afterwards we 
opened a European branch, as we had connections with nine steam¬ 
ship lines there. We have been unable to depend upon the account¬ 
ing by the connecting lines. We have always had to verify their 
accounts and settle differences. Later, Mr. Whaley was elected to the 
position of first vice-president, resident in Paris, in charge of the 
European department. In that position he had charge, among other 
duties, of the company’s traffic interests abroad, conducting negotia¬ 
tions, and carrying on correspondence with the executive officers of 
our European connecting lines, and of renewing expiring traffic con¬ 
tracts and making new rates and arrangements for the following 
season, and of determining rates from Europe, until recently, when 
the control passed into the hands of the United States. Mr. Whaley 
then resigned and I succeeded him. 

Mr. Townsend. The books have been under your charge? 

Mr. Drake. Yes, sir; in a general way, I have had charge of the 
books, with subordinates, the treasurer, and the auditor. 

Mr. Townsend. How much stock have you in this company now ? 

Mr. Drake. One share. 

Mr. Townsend. Is that all you have ever had ? 

Mr. Drake. That is all, since I became a director in 1888. 

The Chairman. You are an employee, rather than an owner of the 
road ? 

Mr. Drake. I am a representative director; that is a recognized 
position. 

Mr. Cromavell. That is true of all the directors. 

Mr. Townsend. Has this stock ever been on the market ? 

Mr. Drake. Since when ? 

Mr. Toaynsend. Since you have been connected with it. 

Mr. Drake. There is always a market for it. 

Mr. Esch. Just in that connection, I notice that General Davis in 
his report says that the stock of the Panama Railroad Company has 
not been quoted for many years, and its market value is not known. 

Mr. Townsend. Has it been quoted? 

Mr. Drake! By the stock exchange regulations when all but a small 
minority of any listed stock passes into the hands of one holder deal¬ 
ings in that stock are officially suspended. It was a very active stock 


74 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

for a great many years, a very high-priced stock up to the time when 
the French Canal Company bought all of the capital stock except a 
small minority. After that time the stock was stricken from the 
stock list and official quotations ceased, for the reason I have stated. 

Mr. Townsend. Through what range does the quotation pass? 

Mr. Drake. The transactions have all been from 60 to par. There 
have been sales at various times of small lots. 

Mr. Townsend. That has been a profitable piece of property almost 
from the beginning? 

Mr. Drake. T think it is one of the most profitable pieces of prop¬ 
erty in the world. 

Mr. Townsend. And has been all the time ? 

• Mr. Drake. The incorporators acquired almost invaluable fran¬ 
chises, as has been proven by the result of operation. 

Mr. Townsend. And has paid as high as 23 per cent dividends? 

Mr. Drake. Yes, sir. 

Mr. Townsend. But still it is sold usually from 60 to 100 ? 

Mr. Drake. For the reasons I gave you. A minority stockholder 
has to get what he can for his stock, because there is no fixed market 
and there are but few shares outstanding. All of the minority 
shareholders were offered by Mr. De Lesseps an opportunity to sell 
their stock at 250, but some did not avail of it. Since then they have 
had to get what they could. Now they have exactly the same kind 
of an opportunity to get par from the United States Government. 

Mr. Cromwell. Uncertainties about the future, and also the fact 
that the earnings have accumulated in the treasury and have not been 
paid out in dividends. 

Mr. Townsend. Mr. Drake, can yon tell us why they accumulated 
in the treasury ? 

Mr. Drake. Yes, sir; it was the policy of the company, because 
we were buying ships, and were going through adverse traffic periods 
with uncertain results and because in 1895 we had undertaken the 
construction of the La Boca pier, which cost us two million and a 
quarter cash, and both the directors and shareholders preferred to 
strengthen the company in anticipation of these extraordinary 
requirements. 

Mr. Townsend. Is there an actual increase and profit for the year 
1893-94? 

Mr. Drake. The contract with the Pacific Mail Company that was 
entered into in February, 1878, expired in 1893, and we declined to 
renew it, because the Pacific Mail’s terms were so exacting that we 
could not reach an agreement. We had arranged to establish a line 
of steamships between Panama and San Francisco, when the mer¬ 
chants of San Francisco learned of it and came forward and took 
up the enterprise. 

Mr. Townsend. Is that the only object you had, to meet those 
extraordinary expenses, for withholding dividends? 

Mr. Drake. Yes, sir; it was a policy adopted. We so stated in the 
printed annual report of each year. 

Mr. Townsend. It was not the policy of the French company to 
get rid of the stockholders and get possession of the stock ? 

Mr. Drake. Oh. not at all; as far as we know, there was nothing of 
that kind. The minority shareholders never were approached in any 
way that we know of, and no attempt made to purchase their stock. 


INVESTIGATION OE PANAMA RAILWAY COMPANY. 75 

company° n ^ ra ^ ^ '" as °^ erec ^ times and not taken by the canal 

ofUic stock? SEND ’ I)ld they mak ® s y stematic effort to get possession 

Mr. Drake. Not that T know of. 

Mr. Cromwell. I can say that they did not. 

Ml . y Townsend. Are these statements that you have prepared here, 
. Ii. I lake, coirect statements taken from your book, showing the 
various items therein scheduled ? 

Mr. Drake Yes, sir; absolutely correct and carefully prepared. 
They are entitled as follows: 1 1 

Statement showing dividends paid. 

Statement showing redemption of first-mortgage bonds (44 per cent) of 1897. 
Statement showing redemption of first-mortgage 7 per cent bonds, how effected, 
statement showing transcript of trustees of sinking fund loan account of 1897 
relating to sale of bonds in said account and accumulation of interest applied 
to redemption of general mortgage sterling 7 per cent bonds. 

Statement showing general mortgage 44 per cent bonds of 1897, how held. 
Statement showing subsidy bonds, 6 per cent. 

Statement showing redemption of 6 per cent subsidy bonds 

Statement showing analysis of entry of $1,740,859.96 to credit of profit and loss 
in 189 <. 

Mr. Townsend. We will have them marked Exhibits Ge. f, g, h, i, 
k, 1, and m. ' te ? ’ 


Exhibit Ge. 


Statement of dividends paid. 


1901, 2 per cent-$140, 000 

1902, 4 per cent- 280, 000 

1903, 8 per cent- 560, 000 

1904, 24 per cent_ 175,000 


Exhibit Gf. 

Statement showing how redemption of first-mortgage 7 per cent bonds, due 

October 10, 1897, was effected. 

2,68G bonds outstanding October 10, 4897, were retired at a cost of_ $2, 612, 338. 34 
Of which there was redeemed by proceeds of sale of 2,000 general- 


mortgage 4i per cenc bonds- 1, 907, 250. 00 

Leaving a balance of_ 705, 088. 34 


Which was contributed by the voluntary sinking fund. 


Exhibit 6g. 

Statement of redemption of first-mortgage per cent bonds, issue of 1897. 


October 1, 1898, 141 bonds---$141,000 

October 1, 1899, 140 bonds_ 140, 000 

October 1, 1900, 139 bonds_ 139, 000 

October 1, 1901, 141 bonds_ 141, 000 

October 1, 1902, 140 bonds_ 140, 000 

October 1, 1903, 140 bonds_ 140, 000 

October 1, 1904, 140 bonds_ 140, 000 


Total_981 bonds_ 981, 000 


















76 


INVESTIGATION OF PANAMA KAILWAY COMPANY. 


Exhibit 6 h. 

Redemption of 6 per cent subsidy bonds. 

November 1 , 1896, 107 bonds_ $107, 000 

November 1, 1897, 114 bonds_ 114, 000 

November 1, 1898, 121 bonds_ 121, 000 

November 1, 1899, 129 bonds_129, 000 

November 1, 1900, 136 bonds_ 136, 000 

November 1, 1901, 144 bonds_ 144, 000 

November 1, 1902, 153 bonds_ 153, 000 

November 1, 1903, 162 bonds_ 162, 000 

November 1, 1904, 172 bonds_ 172, 000 


Total_1, 23S bonds_ 1, 238, 000 

Exhibit 6 i. 

Sinking fund 6 per cent subsidy bonds. 

Original issue of_i_$3,000,000 

Redeemed by annual sinking-fund drawings_ 2, 285, 000 


Outstanding_ 715. 000 

Held in treasury_ 126, 000 


Held by public_ 589, 000 

First mortgage -H per cent gold bonds. 

Authorized issue_$4, 000, 000 


Held by public- 2, 372, 000 

Redeemed by annual sinking-fund drawings_ 981. 000 

Held in treasury_ 647. 000 


4, 000. 000 

Exhibit 6 k. 

Transcript of trustees of sinking-fund loan account of 1S9 7, relating to sale of 
bonds in said account and accumulation of interest applied to redemption of 
general mortgage sterling 7 per cent bonds. 

377 United States registered fours, 1925_$222,798.75 

257 United States registered fours, 1904_ 286, 876. 25 

105 Northern Pacific general lien_ 58,850.00 

3,000 shares Northern Pacific preferred_ 41,587.50 

50 Oregon Improvement first mortgage_ 50, 387. 50 

Accumulated interest on securities other than companies and ac¬ 
cumulated interest due on company’s securities in sinking fund__ 81, 559 . 96 


741, 859. 96 


cent general mortgage to retire 2,686 outstanding general mort¬ 
gage 7 per cent bonds, transferred to sinking fund_ 705, 088. 34 

Unexpended balance of sinking fund transferred to credit of new 
voluntary sinking fund, resolution as per minutes of executive 
committee, October 15, 3897_ 3 ( 3 , 771 . 62 







































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


77 


Exhibit 61 . 

Profit and loss account, December 31, 1897. 

Balance to credit of voluntary sinking fund October 10, 1897_$1, 746, 859. 96 

Made up as follows: 

312 Panama Railroad sinking fund 6 per cent 

subsidy bonds held in voluntary sinking fund. $312, 000. 00 
Unexpended balance in voluntary sinking fund « 

(transferred to company’s treasury as free 
assets, resolution of executive and finance 

committee, October 15, 1897)_ 36,771.62 

- 348, 771. 62 

693 general mortgage 7 per cent sterling bonds 

held by voluntary sinking fund_ 693, 000. 00 

Proceeds sale of securities in voluntary sinking 
fund (resolution of the executive and finance 

committee, September 3, 1897)_ 705.088.34 

- : - 1, 398, 088. 34 

1. 746, 859. 96 

Mr. T ownsend. You add a statement here, and this is tlie state¬ 
ment that you make monthly to the directors, is it ? 

Mr. Drake. Yes, sir; it is a summary of the monthly operations of 
the railroad, making comparisons of the results of the current month 
with the same month of the previous year. As the year progresses it 
shows a comparative statement for each month. 

Mr. Townsend. You make this for the benefit of the board of 
directors? 

Mr. Drake. The only statement that is made by the Panama Rail¬ 
road Company is its annual statement, which is made at the annual 
meeting in accordance with the by-laws. 

Mr. Townsend. This is made for the directors? 

Mr. Drake. Yes, sir. 

Mr. Townsend. How long have you been making this kind of a 
statement ? 

Mr. Drake. Since 1890, when we changed our method of book¬ 
keeping. 

Mr. Townsend. That brings me to the point, how did you happen 
to change your method of bookkeeping in 1896? 

Mr. Drake. There was a question raised as to just how much of the 
revenue of the company was applicable to the payment of dividends, 
and to determine that question Mr. John Scott, a public accountant, 
was employed. He went over the records of the company from its 
incorporation to 1896. 

Mr. Townsend. Who was Mr. Scott? 

Mr. Drake. He was a public accountant. 

Mr. Townsend. Where? 

Mr. Drake. In New York. The treasury minutes show that this 
report of the accountant was brought in after the vice-president and 
general manager had changed our method of bookkeeping to substi¬ 
tute a more modern method. 

Mr. Townsend. Mr. Cromwell, you had something to do with the 
investment of the 10 million dollars received by Panama from the 
United States? 










78 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Cromwell. Yes, sir. 

Mr. Townsend. Was any of that money invested in any of the 
securities of this road ? 

Mr. Cromwell. It was. The Panama Government manifested its 
confidence in the securities of this company by investing about one 
million dollars in the first mortgage bonds of this company. 

Mr. Townsend. What bonds are those. What do you call them? 

Mr. Cromwell. The per cent first mortgage. 

Mr. Townsend! And that investment is still there? 

Air. Cromwell. Still there. 

Mr. Townsend. Are those bonds subject to the drawings? 

Mr. Cromwell. Yes, all part of the same class. The bonds were 
purchased by the Panama Government in the open market, and not 
from this corporation. 

Mr. Townsend. Now, Mr. Drake, I think Mr. Cromwell may have 
explained one thing which your books undoubtedly show, but I want 
to get it clear. 

I notice in your report of 1903 to the stockholders, on page 6 headed 
4i Panama Railroad Company,” that when you analyze the sinking 
fund, the 6 per cent subsidy bonds, you speak of the original issue of 
$3,000,000 which Mr. Cromwell has explained. In parenthesis you 
say: “ Being payments of the advance of annual subsidy of $225,000 
to the Republic of Colombia.” What I want to know is why that is 
not $250,000? 

Mr. Drake. $25,000 of the $250,000 is made payable by the com¬ 
pany, under this concession, directly to the Department of Panama. 
The other $225,000 is applied, first, to the payment of interest on the 
bonds still outstanding in the hands of the public, and then to the 
redemption, after drawing by lot, of sufficient number of bonds to 
absorb the balance of the $225,000. 

Mr. Townsend. I notice on page 16 of your report of December 31, 
1903, the first item is: “ Cost of road, real estate, and equipment, new 
terminals at La Boca being included in the same brackets, $12,045,- 
258.32.” Does that, Mr. Drake, represent the book value of the 
property of the Panama Railroad Company, including the new ter¬ 
minal at La Boca ? 

Mr. Drake. Yes, sir; everything charged to capital account. 

Mr. Townsend. From the beginning? 

Mr. Drake. Yes, sir. 

Mr. Townsend. You have not deducted anything nor made any 
allowances for depreciation? 

Mr. Drake. No, sir. Not as depreciation, because we keep up our 
properties as we go along. 

Mr. Lovering. That $12,000,000 does not mean all the money that 
has been put into necessary repairs and keeping up of property ? 

Mr. Drake. Not at all; it only represents what has been paid out 
for construction and plant and charged to capital account. 

Mr. Townsend. Your dividends are always declared on the basis of 
$7,000,000 capital ? 

Mr. Drake. Yes, sir. 

Mr. Esch. Your book value includes the steamships? 

Mr. Drake. Yes, sir. It is a separate item there. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


79 


Ml. Esch. What do you estimate the three steamships to be val¬ 
ued at? 

Mr. Drake. The three steamers were bought at a bargain and have 
been currently maintained ever since as a part of the operating ex¬ 
penses. The ships Advance and Finance are insured for $200,000 
apiece; that indicates what they are worth to us, but not, of course, 
what they would bring if offered for sale in open market. I can not 
tell precisely what they are worth, but I should sav that those three 
ships to-day are worth $750,000 to us. 

Mr. Vernon H. Brown. From $600,000 to $750,000 in my opinion. 

Mr. Esch. r l hat includes the $375,000 improvements put on them 
in the year ? 

Mr. Brown. It includes their present condition. I would call 
attention to the fact that the Davis report puts them at $583,000. 

The Chairman. I will ask you one more question, Mr. Brown. 
What is your opinion of the adaptability of these vessels to that par¬ 
ticular trade, as to their size, capacity T and speed? 

Mr. Brown. They have answered every requirement admirably up 
to the present time. 

The Chairman. Are they large enough? 

Mr. Brown. I will have to answer that by asking you a question. 
If the Government is going to double up the business here, if we must 
carry down the Government material, supplies, etc., in addition to the 
usual freight, we must have additional tonnage. 

Mr. Drake. We paid $234,000 last year to charter additional ships 
of the same kind for our line while our Advance and Finance were 
cut of commission for reconstruction. 


STATEMENT OF MR. VERNON H. BROWN, 

A director in the Panama Railroad Company. 

Sworn by the Chairman. 

Mr. Brown. Apropos of the inquiry that was recently made in 
regard to the future of the Panama Railroad, the future value of the 
railroad, it seems to me that when the canal is built that the Isthmus 
will then become of very much greater importance as a distributing- 
point. You take all these nine lines of steamers that are running to 
Colon from various points in Europe, they are not loaded for any 
special port, they bring their cargo for the Pacific—some for the 
south Pacific, some for the north Pacific, some for China, Australia, 
Japan, wherever it may be, all in the same cargo. They would have 
to break bulk at Colon, for instance, and that cargo is distributed. 
You can not so well distribute that by canal as by railroad. Here 
may be a car for Valparaiso, another car for Callao, another car for 
up "north, and so on for as many different points as you may choose to 
select. Those goods would naturally be loaded in the cars and go 
across and then be put aboard the ships for the various points for 
which they are destined. It seems to me that the value of that opera¬ 
tion would enhance very much the value of the property, and very 
much increase the business. 

The Chairman. Larger ships? 


80 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Brown. I f von had larger ships you could operate them to 
better advantage than the smaller ones, but having the ships, you can 
not afford to throw them away? 

Mr. Cromwell. Would you like to have the gross business done by 
the steamship and railroad company per annum? 

Mr. Each. If you have it in concise form, ves. 

Mr. Townsend. What is the annual gross business of this company 
as conducted from the New York office? 

Mr. Drake. Total earnings of our line, $2,004,000 in 1903. The 
gross expense for the year was $1,960,000. Earnings over expenses 
are about $1,000,000. and of that sum about $450,000 to $500,000 is 
used in the discharge of fixed charges of the company, interest on 
bonds, subsidy, and redemption; and the balance of about $500,000 is 
subject to distribution of dividends. 

The Chairman. We thank you, gentlemen, for your courtesies. 

Thereupon, at 4.50 o’clock p. m., the hearing was adjourned. 


Washington, D. C., February 17 , 1905. 

The committee met at 10.30 o'clock a. in., Hon. William P. Hep¬ 
burn in the chair. 

At the request of Mr. Shackleford, the chairman of the subcom¬ 
mittee having under consideration the affairs of the Panama Rail¬ 
road, certain Avitnesses were this morning examined before the Com¬ 
mittee on Interstate and Foreign Commerce instead of before the sub¬ 
committee. 


STATEMENT OF MR. VERNON H. BROWN, 

A director of the Panama Railroad Company. 

Mr. Shackleford. You are one of the directors of the Panama 
Railroad Compaq? 

Mr. Brown. I am. 

Mr. Shackleford. You Avere examined somewhat the other day, I 
believe, at the hearing before the subcommittee at the offices of the 
railroad in New York? 

Mr. Broavn. Yes, sir. 

Mr. Shackleford. Noav, Mr. Brown, being as succinct as you can, 
Ave Avill take that feature of it first, and I Avould like to hear Avhat you 
ha\ r e to say about the line of ships that is operated in connection with 
the Panama Railroad ? 

Mr. Broavn. We esteem it of the greatest importance. It is the 
principal feeder of the line, and a very large proportion of the busi¬ 
ness originates at this end, and we have found from past experience 
that it was the only reliable source of supply in connection Avith the 
railroad. 

Mr. Shackleford. Under the arrangements as they exist hoav, you 
liaA-e, I believe, a through bill of lading from New York to San 
Francisco? 

Mr. Brown. Yes, sir. 



81 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 

Mr. Shackleford. And other Pacific ports? 

YeS ’ sir * In re ^ ard to the traffic business, we have 
Mr. VA alker here, our traffic manager, who will probably answer the 
traffic questions more clearly than I could do, but I am at your dis¬ 
posal for anything that you wish. 

Mr Townsend. I understand, Mr. Brown, that the Panama Rail¬ 
road Company has a contract or agreement with reference to the 
traffic m connection with the Pacific Mail Company? 

Mr. Brown. Yes, sir. 

Mr. Townsend. And, to say nothing about the notice that has 
been served upon them now, when would that contract terminate? 

Mr. Brown. I think it terminates in July. 

Mr. Shackleford. You mean it terminates by notice in July, but 
by the terms of the contract it would terminate when ? 

Mr. Brown. We were obliged to give six months’ notice. 

Mr. Shackleford. It would terminate in 1907, I believe, Mr. 
Townsend. 

Mr. Brown. Oh! I misunderstod your question. 

Mr. Shackleford. Bv the terms of the contract it would terminate 
in 1907? 

Mr. Brown. Yes, sir. 

Mr. Esch. Let me give you the terms of the contract. According 
to article 21 of the agreement, we have this provision: 

Subject to the provisions of a contemporaneous agreement between the parties 
hereto 


The Chairman. What is the date of that? 

Mr. Esch. This is the contract of June 11, 1902. 

Mr. Shackleford. Has either party exercised the election to con¬ 
tinue the contract? 

Mr. Brown. The board of direction voted to give the notice of 
the termination of the contract. 

Mr. Shackleford. The notice of the termination, but Mr. Esch 
read some clause there- 

Mr. Cromwell. The contract runs three years, by its terms, 
with the right to renew for two years more. It expires in June, 
1905, subject to the right of renewal for two years, unless either 
party, upon six months’ notice, terminates it before that time. The 
Panama Company has exercised that election and has given the 
notice, a notice which makes the contract expire on July 13, 1905. 

Mr. Shackleford. The ship line heretofore has consisted of three 
ships, that belong to the company, and you have had some chartered. 
Are there any chartered now outside of those that are regularly 
owned by the company? 

Mr. Brown. We have one under a charter that runs for six months 
yet. We have one under contract, and two on which the contract 
has just run out. They were on time charters, so that we could 
cancel the charters at any time. We found it expedient to do so, 
and we have allowed two'of them to run off recently, and the other 
has about six months to run. 

Mr. Shackleford. Are these ships sufficient for the service between 
Yew York and the Isthmus? 


PAN RY— 05 -6 



82 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Brown. No, sir; we have not found it so. 

Mr. Shackleford. Are there other lines engaged in the traffic? 

Mr. Brown. No, sir; no other lines. By saying “insufficient” I 
mean that we can not maintain the sailings with three ships. Whether 
large or small, we must have regular sailings, and we could not keep 
up the regular sailings with three ships. 

Mr. Shackleford. Are there any other lines out of American ports 
on the Atlantic side that have the privilege of a through bill of lad¬ 
ing on the Isthmus ? 

Mr. Brown. That is a traffic question. The United Fruit Line is 
the only one. 

Mr. Shackleford. I wanted to ask you the general question 
whether there are any other lines. 

Mr. Brown. Yes, sir; the United Fruit Line is the only one I 
know of. 

Mr. Shackleford. There are no other ship lines that issue any 
through bills of lading ? 

Mr. Brown. None that I am aware of. 

Mr. Shackleford. Why is that? Is it because the railroad com¬ 
pany has declined it, or is it because the other lines of ships have 
declined it ? 

Mr. Brown. It has been the only regular line that has made any 
application, as I understand it. 

Mr. Shackleford. Are there anv other lines regularly between 
Colon and New York or between Colon and any other Atlantic or 
Gulf port ? 

Mr. Brown. No, sir. 

Mr. Shackleford. There are none? 

Mr. Brown. No, sir. 

Mr. Shackleford. Have there been any other lines seeking to 
make connections with the Panama Railroad from any of these 
American ports ? 

Mr. Brown. I do not know of any American line. Some of the 
foreign lines have made application. 

Mr. Shackleford. From American ports ? 

Mr. Brown. No, sir; I think they have realty been running from 
American ports north, from Seattle, I think, down to Panama. 

Mr. Shackleford. That was on the Pacific side; I was speaking 
of the Atlantic side. 

Mr. Brown. No, sir; nothing. 

Mr. Shackleford. What I am trying to get at is this: Has the 
arrangement between the Panama Railroad and its own ships been 
one of exclusion ? 

Mr. Brown. Practically, yes, sir. 

Mr. Shackleford. Has it been the policy to exclude other ships 
than their own? 

Mr. Brown. It has not been the policy of the railroad to grant 
through bills of lading to any other line. We are very glad to have 
any business come there, however. 

Mr. Shackleford. On the business that comes out of the port of 
New York going to Colon by other lines than your own, what have 
the rates charged on that by rail across the Isthmus, and by the 
Pacific Mail to other ports, been? Have they been higher or lower 
than that charged on your own line? 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


83 


Mr. Brown. That has been subject to the local rates. 

Mr. Shackleford. Which would make it a higher rate? 

Mr. Brown. Which would make it a higher rate. 

Mr. Shackleford. I am trying to derive the policy of the road 
irom your testimony. On the Pacific side you have no ships now, 
but rely entirely on the contracts you have with the Pacific Mail and 
some other ship lines? 

Air. Brown. Entirely upon traffic agreements. 

Air. Shackleford. Traffic agreements control that entirely? 

Air. Brown. Yes, sir. 

Mr. Townsend. Have you made any different arrangement since 
the United States acquired a majority of the stock? 

Air. Brown. No, sir. 

Air. Townsend. You have the same arrangements now that you 
had prior to that time? 

Air. Brown. Precisely. 

Mr. Townsend. Have you had any applications for the privilege 
of a through bill of lading by any other companies? 

Mr. Brown. That would not come before me unless it was brought 
before the board. 

Air. Townsend. Do you know about that ? 

Air. Shackleford. Air. Drake, I presume, would know that. 

Air. Townsend. I wanted to know whether you know that? 

Air. Brown. I would have to refresh my memory a little before I 
could answer the question definitely. 

Air. Townsend. I do not know of anything else that I wanted to 
ask of Mr. Brown. 

Air. Shackleford. Air. Brown, I will just ask you the general ques¬ 
tion, how would the value of the Panama Railroad be affected by dis¬ 
carding this ship line, which is now a part of its assets? 

Air. Brown. I think that it would be affected very unfavorably. 

Mr. Shackleford. To what extent? 

Air. Brown. I think to the extent that it would be very difficult 
for it to—well, I think it would reduce its earnings very materially. 

Air. Shackleford. Discarding the ship line would have wliat effect 
on its operating expenses; would it pay them ? 

All*. Brown. No, sir; I do not think it would. It would not pay 
fixed charges. It certainly would not with the Pacific Mail on one 
side and these other lines on the other. 

Air. Shackleford. AVhat is the reason of that? 

Air. Brown. Because there the main feeder is this line. 

All*. Stevens. AYould not other ships be found to take their place? 

All*. Brown. We do not think so. It has not been the case in pre¬ 
vious experiments of that kind. 

All*. Stevens. How long since there has been an opportunity for 
experiment ? 

Mr. Brown. A few years ago; that is all on record. We gave the 
facts in New York last week, and you have the exact dates. 

Air. Stevens. The coastwise laws do not apply to the traffic to the 
Isthmus? 

Air. Brown. Not except on through trade. On through freight it 
would prohibit any foreign vessel from getting a through bill of lad¬ 
ing. Of course you refer only to American points? 

Air. Stevens. Yes, sir. 


84 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Brown. Points where they have the flag ? It would be impos¬ 
sible for foreign vessels to get through bills of lading? 

Mr. Stevens. And it is that through bill of lading that constitutes 
the principal value of those ships, and the principal freight that is 
carried goes on through bills of lading? 

Mr. Brown. Not necessarily. Foreign vessels of course would get 
a through bill of lading from foreign ports. The question is whether 
the Government having control of the railroad would be ready to 
enter into a commercial business, and prorate and give the through 
bill of lading. It could not be done from one American port to 
another. 

Mr. Shackleford. Under the American flag? 

Mr. Brown. No, sir. 

Mr. Shackleford. Are there no American lines that could compete 
in that line ? 

Mr. Brown. I do not know what might turn up. 

Mr. Shackleford. I mean, there are not now ? 

Mr. Brown. No, sir. 

Mr. Shackleford. You said to part with this line would depreciate 
the property very much ? 

Mr. Brown. It would depreciate the property bv reducing its earn¬ 
ings enormously. 

Mr. Esch. When were the three ships put on to the Atlantic in the 
company’s service ? 

Mr. Brown. In 1897. 

Mr. Shackleford. Your contention now is that those ships ought 
to be retained in order that the company might make a dividend, or 
pay its fixed charges. Is it not a fact that prior to 1893 the company 
paid its fixed charges and dividends, and a fact that in one year it 
paid 34 per cent? 

Mr. Brown. Yes, sir. 

Mr. Esch. And then if the ships were taken off the service, or dis¬ 
continued, might it not be possible still to continue to pay dividends, 
if it was possible prior to 1893 ? 

Mr. Brown. We had the connections prior to 1893 with the Pacific 
Mail. 

Mr. Esch. Of course you have the Pacific Mail now ? 

Mr. Brown. That is only on the Pacific side, now. Previously we 
had it on both sides. 

Mr. Esch. On both sides ? 

Mr. Brown. Yes, sir. 

Mr. Esch. That extended how far back? 

Mr. Brown. Twelve or fifteen years—to 1878. 

Mr. Esch. Twelve or fifteen years back ? 

Mr. Brown. Yes, sir. 

Mr. Esch. Yet even prior to that time the company paid very con¬ 
siderable dividends, did it not? 

Mr. Brown. Yes, sir. 

Mr. Esch. Would it be possible to do that if the steamship line 
were discontinued ? 

Mr. Brown. We do not think it would. 

Mr. Esch. You do not think it would? 

Mr. Brown. No, sir. 

Mr. Esch. Would it be possible to make dividends if you retained 



INVESTIGATION OF PANAMA RAILWAY COMPANY. 85 

the three ships on the Atlantic side and discontinued the contract 
with the Pacific Mail? 

Mr. Brown. It would disarrange the whole schedule. It depends 
altogether on what policy is to be adopted, and what is to be substi¬ 
tuted for the Pacific Mail. Without some substitution, we still think 
that it would make a loss of business. In order to make a satisfactory 
and proper service, you must have one that is regular and efficient, 
and it can not be done by trusting to luck and taking your chances of 
having a ship here when you want it, or somewhere else. You must 
have regularity. 

Mr. Esch. Of course you have that now by requiring the Pacific 
Mail to make three trips a month? 

Mr. Brown. Yes, sir. 

Mr. Esch. And you make the same number of trips on the 
Atlantic ? 

Mr. Brown. Yes, sir. 

Mr. Stevens. Do you know of any ships under the American flag 
that would be fitted for that service on the Atlantic side? 

Mr. Brown. I do not know of any available. 

Mr. Stevens. The number of ships under the flag is limited ? 

Mr. Brown. Yes, sir. 

Mr. Lovering. What particular advantage has the Pacific Mail 
over anv other possible connection on that side ? 

Mr. Brown. They have a larger amount of tonnage at their dis¬ 
posal, and they run their business on business principles, and have had 
the experience in this trade of upward of fifty years. They have 
had upward of fifty years of this service. They have their agencies 
all along the coast and are fully equipped to carry out the contract. 

Mr. Lovering. Does the business that comes from the Panama 
Railroad constitute any very large proportion of the Pacific Mail 
business ? 

Mr. Brown. I could not say what percentage it would be. I was 
just about to say that it was an important proportion; but Mr. 
Drake can answer that more definitely. 

The Chairman. Mr. Brown, I would like to ask you if you said 
that the contract between the Panama Railroad Company and the 
Pacific Mail Steamship Company could be terminated after three 
years upon ninety days’ notice? 

Mr. Brown. No, sir; the notice of termination has already been 
given. 

The Chairman. Now, is that correct? 

Mr. Brown. That the notice has been given? 

The Chairman. No, sir; but that either party may terminate that 
contract? 

Mr. Brown. Yes. sir; it is correct. 

The Chairman. On the contrary, is it not true that the contract 
inures for three years, and may be continued for two more ^ears at 
the request of either party ? 

Mr. Brown. That is, assuming that the option of cancellation had 
not been availed of, which has been done. 

The Chairman. Is there anything of that kind in there? Has not 
the Pacific Mail Company, under that stipulation, the right to con¬ 
tinue that contract for two years? 


86 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Wanger (reading) : 

Subject to the provisions of a contemporaneous agreement between the par¬ 
ties thereto, of even date herewith. 

Mr. Brown. What is the date of that agreement? You will see 
that it is to terminate at the end of so many years—two or three 
years. 

Mr. Shackleford. But I think you will find that there is no clause 
by which either party may terminate it on notice. 

The Chairman. Will you read that, Mr. Wanger ? 

Mr. Wanger (reading) : 

Subject to the provisions of a contemporaneous agreement between the parties 
thereto, of even date herewith, this contract, except as herein otherwise expressly 
prescribed, shall remain in force for three years from the lltli day of June, 1902, 
and for the further period of two years if either party shall so elect, and if 
such party shall have given notice of such election to the other party at least 
ninety days before the expiration of the first term of three years. 

The Chairman. Now, without some provision in the contempora¬ 
neous contract, I do not see how you will terminate that contract if 
the other party wants to continue it. 

Mr. Cromwell. Here is the contemporaneous contract to which 
that is made subject, which may not have been brought to your atten¬ 
tion, Mr. Chairman [handing pamphlet to the chairman]. It is 
article 4. 

The Chairman (after examination). This reads: 

If at any time during the continuance of said traffic agreement, a majority 
of the shares of the railroad company or its railroad property shall he purchased 
or acquired by the United States of America, or by any person or persons repre- 
senting it, or acting in its behalf, then either party hereto may give notice in 
writing to the other of its intention to terminate said traffic agreement, and at the 
expiration of six months from the giving of such notice the said traffic agreement 
and the previous articles of this agreement shall terminate, come to an end, and 
be utterly null and void thenceforth, anything in said traffic agreement or 
herein contained to the contrary notwithstanding. 

Mr. Brown. That is just the position, sir. That notice has been 
given. 

The Chairman. Mr. Brown, I would like to ask you what is the 
total cost to the Panama Railroad Company of the maintenance of 
the offices in New York? 

Mr. Brown. That is a question that I can not answer offhand. 

The Chairman. Approximate it. 

Mr. Brown. Well, I presume we have the figures here, but I will 
say that it is less than $100,000. 

The Chairman. 1 )oes that cover all of the expenses of the steam¬ 
ships and of the railroad? 

Mr. Brown. It covers all the expenses of the clerical force and 
office force, and such things. 'Of course it does not include the ships’ 
officers or anything of that kind. 

Mr. Wanger. And it does not include the salaries of the officers of 
the railroad company? 

Mr. Brown. I understand that is the whole amount. 

The Chairman. What are the salaries paid the officers of the com¬ 
pany in New York? What do they aggregate? 

Mr. Brown. I can not answer that. 

The Chairman. I want to see how much the officers of this com¬ 
pany know about the management of this business. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


87 


Mr. Brown. Well, we have got quite a large number there, and it is 
impossible for me to carry all those figures in my mind. 

The Chairman. Approximate it, if you please. 

Mr. Brown. I can not answer that question. 

The Chairman. You can not answer it? 

Mr. Brown. No, sir. 

The Chairman. Can you come within $50,000 of it ? 

Mr. Brown. Well. T do not care to guess about it, sir, at all. 

The Chairman. What is your position in connection with the com¬ 
pany ? 

Mr. Brown. I am a director. 

The Chairman. A director. What is your salary ? 

Mr. Brown. None whatever. 


The Chairman. You have no salary ? 

Mr. Brown. No, sir. 

The Chairman. No compensation? 

Mr. Brown. Director’s fees. 

The Chairman. Oh! What are the director’s fees? 

Mr. Brown. The director's fees are $25 a meeting attended; execu¬ 
tive committee fees, $10 a meeting attended. 

The Chairman. How many meetings are there in a vear? 

Mr. B] rown. Well, the executive committee meets twice a week. 

The Chairman. Twice a week ? 

Mr. Brov t n. The board meetings are twice a month. 

The Chairman. Then there are 24, and 104 meetings a year ? 

Mr. Brown. Yes, sir. 

The Chairman. At $10 a meeting? 

Mr. Brown. Yes, sir. The board meetings, twice a month, are $25. 
The Chairman. $25? 

Mr. Brown. Yes, sir. Those are the directors’ meetings. 

The Chairman. That does not amount to such a sum as might be 
designated “ salary,” in your judgment? 

Mr. Brown. No, sir; it does not. It is only paid in case you are 
there. If anything happens so that you do not go, you do not get 
the fee. 

The Chairman. Are the meetings pretty generally full—fully 
attended, I mean? 

Mr. Brown. They are reasonably so. 

The Chairman. What other salaries are paid there in the city of 
New York? 

Mr. Brown. In other corporations? 

The Chairman. No sir; in this one. 

Mr. Brown. That is the only one I know of, sir. There is no other 
emolument that I know of, in any way, shape, or manner to directors. 
The Chairman. Have you not salaried officers in connection with 

the railroad? . 

Mr. Brown. Yes, sir; there are some salaried officers, there is 

the president. 

The Chairman. What is his salary ? 

Mr. Brown. We can give you the exact figures here. 

The Chairman. Do you know or do you not know ? 

Mr. Brown. Yes, sir; I know. 

The Chairman. What is his salary ? 

Mr. Brown. $10,000. 


88 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


The Chairman. What other officers get salaries? 

Mr. Brown. There is the vice-president and secretary. 

The Chairman. What is the salary of the vice-president? 

Mr. Brown. Well, about $8,000. I will not be sure whether it is 
$500 more or less. 

The Chairman. What is the salary of the secretary ? 

Mr. Brown. That is embodied with that of vice-president. I re¬ 
ferred to the two together. 

The Chairman. The two offices are filled by one man? 

Mr. Brown. Yes, sir. 

The Chairman. Are there any other salaried officers ? 

Mr. Brown. The heads of all the departments. There are the audi¬ 
tor and the treasurer and the traffic manager and the purchasing 
agents and various others. 

The Chairman. Can you approximate what they aggregate ? 

Mr. Brown. I could not answer without a list of the names. I 
did not expect to be questioned on that, and I have had no occasion 
recently to look up the matter, and I could not say offhand. 

The Chairman. What change has been made in the salaries of any 
of these officers in recent years? 

Mr. Brown. I do not know, sir, that there has been any change at 
all. 

The Chairman. It is the same. Is it not true that the expense 
account paid by the Panama Railroad last year in the city of Yew 
York—its business there—all of it, steamship and railroad, aggre¬ 
gated about $200,000? 

Mr. Brown. I would like to have the stenographer read that ques¬ 
tion. 

(The question was repeated by the stenographer.) 

Mr. Brown. I would like to know what is included in “ expense 
account.” 

The Chairman. You take your definition of it. 

Mr. Broavn. I have already stated that the expenses of the office 
were, to the best of my recollection, within $100,000. That includes 
all clerical expenses. The disbursements of the ships and their sup¬ 
plies are separate. 

The Chairman. What was the total expense paid out there, I mean 
in the city of New York, last year? 

Mr. Broavn. You mean including dockage and cost of piers and cost 
of whaiwes? 

The Chairman. Yes, sir; anything. 

Mr. Broavn. I can not answer that. 

The Chairman. Can a t ou approximate it? 

Mr. Brown. No, sir; I can not. 

The Chairman. Was it in excess of $200,000 ? 

Mr. Broavn. I can not say. 

The Chairman. What percentage of the gross receipts of the Pan¬ 
ama Railroad Company last year Avas expended for salaries, office 
rent, and similar expenses in the city of NeAv York? 

Mr. Broavn. I can not answer that question offhand. 

The Chairman. Can you approximate it? 

Mr. Broavn. No, sir. 

The Chairman. Are you a member of the executive committee? 

Mr. Broavn. I have been; yes, sir. 





89 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 

Mr. Townsend. Are you not now? 

Mr. Brown. Yes, sir. 

^ ^ HAIRMAN • M hat were the gross receipts of the Panama Rail¬ 

road Company last year ? 

Mr. Brown. I do not carry those figures in my mind, sir, and it is 
impossible for me to answer any such questions. As I say, I have 
been connected with business elsewhere. I am, and for many years 
have been, the Yew York representative of the Cunard Steamship 
Company, and I am not one of the managing officers of the Panama 
Railroad Company; and those who can give you those things are here 
prepared to do so, and I am not prepared to answer. 

The Chairman. What was the gross amount of fees—you speak of 
them as fees received by you from the Panama Railroad Companv 
last year? 1 J 

Mr. Brown. I do not know. I should say, offhand, something less 
than $1,000, or about $1,000. 

The Chairman. How many directors and members of the execu¬ 
tive committee were there last year ? 

Mr. Brown. There were 5 members of the executive committee last 
year, and the full number of the members of the board is 13. 

The Chairman. How many ? 

Mr. Brown. Thirteen. 

The Chairman. All of the members of the executive committee are 
members of the board are they? 

Mr. Brown. Yes, sir. 

Mr. Shackleford. Plow many of the Canal Commission were on 
that executive committee? 

Mr. Brown. One; Mr. Parsons. 

Mr. Townsend. Did the members of the Canal Commission get. the 
same fees that you did ? 

Mr. Brown. I presume so. I was not the paymaster. . I presume 
they were all paid the same. 

Mr. Bi •own continued his testimony in a supplemental statement, 
which the subcommittee placed in the record, as follows: 

[Panama Railroad Company. Panama Railroad. Panama Railroad Steamship Line.] 

Yew York, February 20, 1905. 

Plon. D. W. Shackleford, 

Chairman Sub committee Panama Inquiry, 

W as king ton, I). C. 

Dear Sir: In accordance with vour request I submit my views 
regarding maintenance of the steamship line between Yew York and 
the Isthmus of Panama, in connection with the railroad. 

I will say at the start that I strongly advocate a continuance of the 
present system of regular sailings, and a through connection with San 
Francisco and intermediate ports on the Pacific coast. 

First. The steamship line is an important feeder to the railroad, 
and its withdrawal would mean a serious loss in revenue. 

Second. The withdrawal of the line and substitution of steamers by 
independent parties would inevitably induce higher freight rates, as 
it is hardly to be expected outside interests would be content with the 
present percentage allowed by the railroad for sea transportation. 


90 


INVESTIGATION OF PANAMA KAILWAY COMPANY. 


With 46 miles of land carriage against nearly 2,000 miles by sea, the 
demand for a larger percentage than now exists would not seem 
unreasonable. 

This would mean reduced earnings for the railroad and increased 
freight rates to shippers, and the enormous amount of material, labor¬ 
ers, etc., to meet requirements of the Canal Commission would make 
the Government the heaviest sufferer. 

Third. The irregularities and uncertainties of a disconnected serv¬ 
ice would tend to discourage all shipments via the Isthmus for points 
beyond, and force shippers to avail of the transcontinental railroads 
even at materially higher rates, as reliability, regularity, and dispatch 
are absolute essentials with all transportation companies. 

Fourth. The through route to San Francisco via the Isthmus is the 
only check and regulator upon transcontinental rates, in corrobora¬ 
tion of which statement you have only to refer to the past records and 
agreements between those lines and the Panama Railroad Company, 
as explained to you when in New York. 

Fifth. Cancellation of existing agreement with Pacific Mail Steam¬ 
ship Company, discontinuing its service from Panama north to San 
Francisco, I think, will prove a mistaken policy. Mv views on this 
point are based upon the experience with which you are familiar 
through the recent inquiries and investigations of your committee at 
the company’s offices in New York, when the failure of the u open- 
door policy ” and the attempt to substitute outside ships for a thor¬ 
oughly equipped and well-managed line were shown to have resulted 
in disaster and the practical bankruptcy of some of the parties 
interested. 

The only possible adverse criticism which the Government can 
make to the Pacific Mail agreement is its exclusiveness; but without 
this, neither the Pacific Mail nor any other steamship line was willing 
to concede to the Panama Railroad Company the arbitrary fixing of 
rates which it was so manifestly in the interest of the railroad to 
control. 

In this connection I would remind you that the agreement author¬ 
izes the railroad to practically fix all through rates, both east and west 
bound, which is really the key to the situation as a regulator of trans¬ 
continental rates. 

Sixth. With the withdrawal of its regular and reliable feeders, the 
revenue of the Panama railroad would be so largely impaired that 
its ability to pay dividends or even fixed charges might reasonably be 
questioned. 

Seventh. The suggestion to transfer the company’s headquarters 
from New York to the Isthmus would, in my judgment, be a most 
unwise proceeding. New York is the great center of business, and if 
the steamship connection is to be maintained the advantages of New 
York are too conspicuous to require any argument. Here all busi¬ 
ness emanates, all contracts are made, ships outfitted and repaired, 
and this is the natural base of operations. 

Very respectfully, yours, Vernon H. Brown. 


INVESTIGATION OF PANAMA KAILWAY COMPANY. 


91 


STATEMENT OF MR. EDWARD A. DRAKE—Continued. 

Vice-president and secretary of the Panama Railroad Company. 

Mr. Townsend. I think you testified the other day that you were 
the vice-president and secretary of the Panama Railroad Company? 

M*r. Drake. Yes, sir. 

Mr. Townsend. And that you had become vice-president on account 
of the resignation of Mr. Whaley, who was vice-president ? 

Mr. Drake. Yes, sir. 

Mr. Townsend. 1 on were going to give me the other day the date 
of his resignation. 

Mr. Drake. It was September 13, 1904. 

Mr. T ownsend. And since then you have acted as vice-president 
and secretary ? 

Mr. Drake. I had acted as vice-president and secretary for a short 
time before the beginning of the year. Mr. Whaley had retained his 
directorship, but had resigned as vice-president. 

Mr. Townsend. He was acting as vice-president with special refer¬ 
ence to the tariff end of the business ? 

Mr. Drake. He had been a member of the board for many years. 

Mr. Townsend. Did you not testify, or somebody, that his duties as 
vice-president were to look especialty after the interests of the Paris 
stockholders ? 

Mr. Drake. No, sir; I did not so testify. 

Mr. Townsend. Who did? 

Mr. Drake. I do not know. Mr. Whaley was a very prominent 
engineer, who had been elected by the board as vice-president and 
general manager in 1895. He was particularly well qualified for the 
post. He visited the Isthmus regularly annually, and had entire 
charge of the care and operation of the property; and because of his 
familiarity with the language, being a polyglot, and being a man of 
large experience of railroad affairs and engineering, he looked after 
the affairs of the company both at home and abroad—in Europe. 
He attended the conferences abroad, being a man of sufficient ability 
to adequately represent the large interests involved in the company, 
and he was elected to his position on that account. 

Mr. Townsend. Mr. Simmons is the president, is he ? 

Mr. Drake. Yes, sir. 

Mr. Townsend. I asked him these questions, and he answered at a 
former session, as I will read: 

Mr. Townsend. Mr. Simmons, can you tell me what duties the first vice- 
president performed prior to Mr. Whaley’s resignation? 

Mr. Drake. At the time Mr. Whaley was elected he was recom¬ 
mended to us very strongly, and among his recommendations were 
those of the principal shareholders, who were the French company. 

Mr. Townsend. Did he not state that the reason he resigned was 
because the Paris company had parted with its holdings, and there 
was no further need for him ? 

Mr. Drake. He had contemplated resigning for some time before 
he did, and when there was an entire change of ownership and an 
entire severance with the French company he resigned. He did not 


92 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


resign at once, but remained as a director for some time, and then 
resigned. 

Mr. Townsend. What has been your compensation—I think you 
have answered this once, but for the satisfaction of the committee I 
will ask you again—as secretary, prior to your assuming the duties 
of vice-president ? 

Mr. Drake. I had acted as assistant general manager and secre¬ 
tary. and my salary was $7,000. At the time of Mr. TV haley’s resig¬ 
nation I was second vice-president and secretary, and my salary was 
$8,500. 

Mr. Townsend. What is your salary now? 

Mr. Drake. $8,500, in the combined position of vice-president and 
secretary. It was not increased when Mr. Whaley resigned. I am 
the managing officer of the company to-day, under the direction of 
the president and executive committee. 

Mr. Townsend. Is Mr. Cromwell one of them ? 

Mr. Drake. Ilis law firm, Messrs. Sullivan & Cromwell, are gen¬ 
eral counsel of the company. 

Mr. Townsend. Has he a salary ? 

Mr. Drake. He has an annual retainer, as is customary. 

Mr. Townsend. Of how much ? 

Mr. Drake. $6,000 a year. 

Mr. Townsend. Does he have any compensation besides that ? 

Mr. Drake. We have, very infrequently, had to fall back on a pro¬ 
vision for other services of a legal nature whenever we have had occa¬ 
sion to have our counsel represent us in court, when they have had to 
try causes, argue cases, and especial service of that sort. There is a 
provision that counsel should receive additional compensation in 
such case only—suits in court, 

Mr. Townsend. Can you tell what compensation he has received 
since April, 1902? Your reports, I believe, are to the end of the cal¬ 
endar year ? 

Mr. Drake. Yes, sir. 

Mr. Townsend. Since December 31, 1901, then? 

Air. Drake. Nothing above his $6,000, except in one large suit in 
an English court about $3,000 and in a suit securing to us title to 
bonds about $2,500. There have been no other cases, and we have had 
no other pleadings in court. It is a general retainer that we pay the 
firm to cover all current work. . I can tell by reference to the docu¬ 
ments. It would be almost impossible without so doing for me to sub¬ 
divide. I can tell you without looking at any documents, though, that 
there has been nothing 

Mr. Townsend. How can von tell? 

Mr. Drake. There is nothing to indicate that he received any¬ 
thing more than his annual retainer other than I have indicated. 
There are small cases of course arising continually, on which there are 
incidental expenses; for instance, expenses of the steamship line, of 
the piers, and suits for damages and adjustments that are chargeable 
to legal expenses. The expenses themselves are all charged in our 
subdivision of accounts to u legal expenses,” so that while, if I were 
to state the amount of $10,000 which appears here it would indicate 
that it had been all paid to Mr. Cromwell’s firm, while as a matter of 
fact it has not, I am safe in saying that the firm of Mr. Cromwell 
has received in three years not exceeding two thousand a year for 




INVESTIGATION OF PANAMA RAILWAY COMPANY. 


93 


extra service regularly reported and on our files. The general item 
includes attorneys on the isthmus and our attorneys at Bogota. 

Mr. Townsend. You spoke of incidental expenses? 

Mr. Drake. That includes the cost of telegraphing or typewriting, 
and expenses incidental to settlement of suits, and he received, of 
course, the attendance fee of $25 a meeting for attending directors’ 
meetings. 

Mr. Townsend. That is for his attendance at meetings? 

Mr. Drake. Tes, sir; whenever he attends. 

Mr. Townsend. He is a member of the executive committee? 

Mr. Drake. Of the executive committee and of the board. 

Mr. Townsend. Did Mr. Simmons, who was president, receive also 
an additional fee for his attendance on meetings? 

Mr. Drake. Yes, sir; he did. 

Mr. Townsend. In addition to his salary? 

Mr. Drake. Yes, sir. 

Mr. Townsend. So that if he had attended them all he would have 
received $1,640 per annum? 

Mr. Drake. Yes, sir. 

Mr. Townsend. Do you know whether he did receive that or not? 

Mr. Drake. I do not know just what he received. We have in this 
summary a lump sum charged to committee and board fees. He was 
very regular in his attendance—seldom absent, as the records show. 

Mr. T ownsend. Did you keep an accurate account of these? 

Mr. Drake. Yes, sir. 

Mr. Townsend. Can you give them? 

Mr. Drake. The treasurer can. That is, a detailed account. The 
directors’ and committee fees account in 1904 is $8,920 for 11 months 
to November 30. That is the total amount expended for directors 

The Chairman. Is not that the uniform charge for every member 
of the directory ? 

Mr. Drake. No, sir. 

The Chairman. Do not they get their fees whether they attend or 
not, and is not that the aggregate, the total, of the fees for attendance ? 

Mr. Drake. No, sir; they do not get their fees unless they attend. 

The Chairman. Will you now turn to your report there and show 
what sum was paid to each one? 

Mr. Drake. I could not do that. That would be shown by the 
vouchers and by the roll book. 

Mr. Richardson. You mean to say that they only got their fees 
when they attended ? 

Mr. Drake. Only when they attended. It is customary with some 
corporations to disburse the entire amount involved in fees for meet¬ 
ings of their executive committee, and to distribute it pro rata to those 
who attend, but that is not our custom. 

Mr. Richardson. Do they usually attend ? 

Mr. Drake. The attendance is fair and regular. 

Mr. Townsend. I think you answered the question, but what was 
the total amount paid ? 

Mr. Drake. For the 11 months of 1904 it was $8,920. 1 do not 

know what proportion of that sum should be divided between attend¬ 
ance of directors and the attendance of members of the executive com¬ 
mittee. The committee consists of six and the board consists of 13 
members. 


94 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Townsend. Do you know how much it would have amounted 
to if they had each drawn $1,640 a year, the largest possible amount ? 

Mr. Drake. It would be $13,440. 

Mr. Townsend. So that they did not all draw their full amount ? 

Mr. Drake. Oh, no. sii*. ‘There is always a quorum present to 
attend the meetings of the board, and it frequently occurs that the 
entire board is present. There is almost always in excess of a quorum 
present at meetings of both the board and the committee. A quorum 
of the board is 5 and of the committee 3. There is almost always an 
attendance of four of the committee and very frequently of all of 
them, but rarely of all. 

Mr. Townsend. I will ask you, as Mr. Brown did not seem to know 
for sure, whether these canal commissioners who were acting as 
directors received the $25 a time for attending meetings of the board? 

Mr. Drake. They did, sir. When they attended the first meeting 
after their election there was some hesitancy about accepting it. 
In fact, one director filed with us a letter, saying that lie believed in 
the restriction—or rather that, under his construction of the Presi¬ 
dent’s letter, he was not entitled to receive it. 

Mr. Townsend. Which one was that ? 

Mr. Drake. Mr. Gunsky. Later on—I do not know that it is 
proper for me to say this—upon an appeal to a ruling power, it was 
decided that the intention of that letter was not to invade the prac¬ 
tices of the railroad company, and that they were entitled to receive 
the fees which were disbursed customarily. In fact, it would have 
been invidious not to pay them. It would have raised the question 
as to whether any of the directors should receive their fees. 

Mr. Mann. We know usually what we refer to when we say “ a 
ruling power; ” in this case what was this power ? 

Mr. Drake. I do not know, sir. 

Mr. Mann. How do you know that it was “ a ruling power?” 

Mr. Drake. It was decided that they could accept their fees, and 
from that time they have done so regularly. 

Mr. Townsend. Now, you were going to analyze the item on page 
17 of your annual report. Those items are all about the same. I 
refer to the 1903 one in particular. I think they are paged in the 
same way. This is on page 17 of the annual report to the stock¬ 
holders by the Panama Railroad Company, dated as of December 31. 
1903. It shows a balance to the credit of profit and loss of 
$4,191,929.91. You were going to analyze that proposition for us, 
so that we would understand what was included in that item. 

Mr. Drake. Yes, sir; agreeably to your request made at the New 
York session, the treasurer has prepared the exhibits you desired 
and has certified to them. They are as follows: (1) Analysis of 
balance sheet as of December 31, 1902 ; (2) analysis of balance sheet 
as of December 31, 1903; (3) statement showing additions to prop¬ 
erty or capital expenditures paid for out of net earnings as of 1903. 

In addition to these the treasurer has prepared and certified as 
\our committee requested: (4) Condensed statement of profit and 
loss account from December 31, 1896, to December 31, 1902, showing 
the balance December 31, 1902, of $4,201,587.09; (5) condensed 
statement of same account from December 31, 1896, to December 31, 
1903, showing the balance of $4,191,929.91. 

The Chairman. These will be marked as Exhibits 8 to 14, inclusive. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


95 


Exhibit 8 - 9 . 

Analysis of balance sheet of the Panama Railroad Company , December 31 , 1902. 


ASSETS. 

Current assets: 

Coal and supplies on hand_ $187,682.74 

Due from connecting companies_ 123^949.27 

Due from United States Government_ 21, 025.15 

Due from Republic of Colombia_ 21, 367. 21 

Due from companies and individuals_ 55, 279. 95 

Accrued interest on deposits..:_ 6,677.06 

Accrued interest on securities owned_ 2, 047. 50 

Unadjusted accounts_ 79, 515. 71 

Prepaid insurance and charter of steamers_ 19*506.27 


LIABILITIES. 

Accrued interest on bonds_ 37, 332. 50 

Fund for redemption of bonds___ 137, 625. 85 

Due Republic of Colombia_ 21, 875. 00 

Allowance to cover excess interest over contract 
rate on 4J per cent bonds sold to prepay in¬ 
debtedness due the contractors for new terminal 

at La Boca on October 15, 1905_ 39, 3S6. 44 

Current liabilities: 

Isthmus drafts not presented_ 13, 591.11 

Cupons not presented_ 7, 247. 50 

Audited vouchers__ 53, 632. 21 

Unclaimed dividends_ 117. 00 

Due deceased or missing employees_ 2, 230. 70 


$517, 050. 86 


313, 038. 31 


Balance due Panama Railroad Company_ 204,012.55 

Improvement and construction accounts__ 114, 456. 98 

Fund for replacement of boilers and special repairs to tugs_ 22, 544. 88 

Cash in banks and with agents_ 471, 525. 50 

Investment of surplus earnings: 

Additions to property paid out for earnings 


as per statement_$1, 627, 604. 44 

Bonds in treasury purchased out of earnings-- 203,037.50 

-1, S30, 641. 94 

Cost of road and equipment_ 12, 572, 009. 68 

Less additions to property paid for out of earnings- 1, 627, 604. 44 


10, 944, 405. 24 

Bonds and stock amount to_$10,299,000.00 

Less bonds in treasury (unissued). 913,000.00 

- 9. 386, 000. 00 

-,- 1, 558, 405. 24 


Balance to credit of. profit and loss 


4, 201, 587. 09 


SUMMARY. 

Balance of assets and liabilities due Panama Railroad Company— 204,012.55 
Suspense accounts, in process of transfer to operating expenses: 

Improvement and construction accounts- $114, 456. 98 

Fund for replacement of boilers and special 

repairs to tugs- 22, 544. 88 

- 137 , 001 . 86 

Cash in banks and with agents- 471, 525. 50 

Investment of surplus earnings--- 1,830,641.94 

Cost of road and equipment in excess of bonds and stock issued— 1, 558, 405. 24 


4, 201, 587. 09 


Cash in banks and with agents, as stated above 


471, 525. 50 














































INVESTIGATION OF PANAMA RAILWAY COMPANY". 


96 

The source from whence this cash was derived is as follows : From receipts for 
transportation of freight, treasure, mails, baggage, and passengers; from 
interest and exchange, lighterage, water supplied shipping, rental of property, 
wharfage and light dues at Colon, wharfage at Panama and La Boca, storage 
and freight handling, telegraph, ballast, etc.; from sale of coal and supplies and 
work done at machine shops for the public. 

S. Deming, Treasurer. 

February 17, 1905. 


Exhibit 10 . 

Statement shotting additions to property or capital expenditures paid for out of 

net earnings. 


1895. Steamers Allianca. Finance, and Ad ranee _ $336,655. 50 

1896. Two steel lighters_ 24, 393. 35 

1896. Land at Bohio_ 2 , 500. 00 

1896- 97. Water tank and pipes to connect Monkey Hill reservoir_' 3,464. 81 

1897. Installation of electric plants, providing new staterooms, and 

other additions on steamers mentioned above_ 33, 513. 77 

1898. New floating pile driver_ 7,428.03 

1901. Electric-light plant. Colon_ 10,055.19 

1901. Ice-making plant, Colon_ 6 , 792. 70 

1901. Dredging attachment for floating pile driver_ 1,083.34 

1901-2. New tracks, Colon yard_ 12, 462. 48 

1901-2. Improvements to pier No. 2, Colon_ 12, 313. 53 

1901-2. Three new coal lighters_ 36,342.40 

1897- 1902. New terminal at La Boca_$2,220,357.13 

Less provided by disposal of bonds_ 1. 087, 000. 00 

-1,333, 357 . 13 

1902. Filling lagoon north of pier No. 1, Colon_:_ 4,100. 73 

1902. Tank at Pedro Miguel_ 3,141. 48 


February 17, 1905. 


1, 627, 604. 44 
S. Deming, Treasurer. 


Exhibit 11 -12. 

Analysis of balance sheet of the Panama Railroad Company, December 31,1903. 


ASSETS. 

Current assets: 

Coal and supplies on hand_$176, 412. S 6 

Due from connecting companies_ 108,060.58 

Due from United States Government_ 24, 437.16 

Due from Republic of Colombia_ 4, 999. 93 

Due from companies and individuals_ 48, 078. 50 

Accrued interest on deposits_ 13, 682. 96 

Accrued interest on securities owned_ 1,777.50 

Unadjusted accounts_1_ 12, 513. 33 

Prepaid insurance and charter of steamers_ 17. 595. 93 


$407, 558. 75 


LIABILITIES. 


Accrued interest on bonds_ 34,137. 50 

Fund for redemption of bonds_ 138, 951. 78 

Due Republic of Panama_ 21,875.00 

Allowance to cover excess interest over contract rate 
on 4^ per cent bonds sold to prepay indebtedness 
due the contractors for new terminal at La Boca 
on October 15, 1905_ 26,061.95 

































INVESTIGATION OF PANAMA KAIL WAY COMPANY. 


97 


Current liabilities: 

Isthmus drafts not presented. $11 100 95 

Coupons not presented__ 1,562.' 50 

Audited vouchers_ 97 ’ 941 . 51 

Unclaimed dividends_ 119.00 

Due deceased or missing employees_ 2,199. 02 


$333, 949. 21 


Balance due Panama Railroad Company_ 73 , 609. 54 

Improvement and construction accounts_ 55 , 570 . 50 

Fund for replacement of boilers and special repairs to tugs_ 34, 002.’ 59 

Cash on hand_ * _ 469 , 994 , 66 

Investment of surplus earnings : 

Additions to property paid for out of earnings, 


as per statement-.$ 1 , 627, 604. 44 

Bonds in treasury purchased out of earnings,_ 176,037.50 

- 1, 803, 641. 94 

Cost of road and equipment_ 12 , 628, 715.12 

Less additions to property paid for out of earnings, 1, 627, 604. 44 


11,001,110. 68 

Bonds and stock amount to_$10,159, 000. 00 

Less bonds in treasury (unissued). 913,000.00 

- 9,246,000.00 

- 1, 755,110. 68 


Balance to credit of profit and loss_ 4,191, 929. 91 


SUMMARY. 


Balance of assets and liabilities due Panama Railroad Company,_ $73, 609. 54 

Suspense accounts, in process of transfer to operating expenses: 

Improvement and construction accounts_$55, 570. 50 

Fund for replacement of boilers and special re¬ 
pairs to tugs_ 34, 002. 59 


- S9> 573 , 09 

Cash in banks and with agents_ 469, 994. 66 

Investment of surplus earnings_ 1 , 803, 641. 94 

Cost of road and equipment in excess of bonds and stock issued_ 1 , 755,110. 68 


Total 


4,191, 929. 91 


Cash in banks and with agents, as stated above- 469, 994. 66 

The source from which this cash was derived is as follows: From receipts for 
transportation of freight, treasure, mails, baggage, and passengers; from interest 
and exchange, lighterage, water supplied shipping, rental of property, wharfage 
and light dues at Colon, wharfage at Panama and La Boca, storage and freight 
handling, telegraph, ballast, etc.; from sale of coal and supplies and work done 
at machine shops for the public. 

S. Deming, Treasurer. 

February 17, 1905. 


pan ry —05-7 



































98 


INVESTIGATION OF PANAMA RAILWAY COMPANY 


Exhibit 13 . 


Panama Railroad Company. 

Condensed statement of profit and loss account from December 31, 1S96 , to 

December 31, 1902. 


Balance to credit of profit and loss December 31. 1896_ $587,465.79 

CREDITS. 

Balance to credit of voluntary sinking fund October 
10, 1897, transferred to this account, and which 
was applied as follows: 

693 general mortgage 7 per cent bonds due 
October 10, 1897, acquired by purchase, can¬ 
celed by trustees_„_ $693,000.00 

Balance required in addition to proceeds of sale 
of 2,000 4^ per cent first-mortgage bonds to 
retire 2,686 general mortgage 7 per cent bonds 
outstanding in hands of public, due October 

10, 1897_ 705,088.34 

312 6 per cent sinking-fund bonds transferred ro 

the treasury_ 312, 000. 00 

- 1,710,088.34 

Net earnings, less dividends paid : 

Earnings for 1897_ 409, 873. 37 

Earnings for 1898_ 266, 746. 73 

Earnings for 1899_ 295, 231. 77 

Earnings for 1900_ 446,764.68 

Earnings for 1901_*_ 259, 590.12 

Earnings for 1902_ 295,384.40 


1. 973, 591. 07 

Less dividends: 

1901, 2 per cent_$140,000.00 

1902, 4 per cent_ 280, 000. 00 

- 420, 000. 00 

- 1, 553, 591. 07 

First mortgage 41 per cent bonds redeemed and 
canceled: 

October 1, 1898, 141 bonds_ 141,000.00 

October 1, 1899, 140 bonds_ 140, 000. 00 

October 1, 1900, 139 bonds_ 139,000.00 

October 1, 1901, 141 bonds_ 141, 000. 00 

October 1, 1902, 140 bonds_ 140, 000. 00 

-- 701, 000. 00 


4, 552,145. 20 

DEBITS. 

Worn-out equipment (less value of usable parts), 
viz, locomotives, cars, lighters, and water boat 

written off 1897-1902_$253,509.38 

Expenses incident to the retirement of the general 
mortgage, 7 per cent bonds, due October 10, 1897, 
and the issuance of the first mortgage, 41 per cent 

bonds replacing the former in part_.-_ 27,128.13 

Uncollectible accounts written off and adjustment of 

sundry accounts, 1897-1902, net_ 69,920.60 

- 350 , 558.11 


Balance to credit of profit and loss December 31, 1902_ 4, 201. 587. 90 

S. Deming, Treasurer. 

February, 17, 1905. 

































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


99 


Exhibit 14 . 

Panama Railroad Company. 


Condensed statement of profit and loss account from December 31,1896, to Decem¬ 
ber 31, 1903. 

Balance to credit of profit and loss December 31, 189G_ .$587,465. 79 

CREDITS. 

Balance to credit of voluntary sinking fund October 10, 1897, 
transferred to this account, and which was applied as follows: 


693 general mortgage 7 per cent bonds, due Oc¬ 
tober 10, 1897, acquired by purchase, can¬ 
celed by trustees_ $693, 000. 00 

Balance required in addition to proceeds sale of 
2,000 44 per cent first mortgage bonds to re¬ 
tire 2,686 general mortgage 7 per cent bonds 
outstanding in hands of public, due October 10, 

1897 _ 705, 088. 34 

312 6 per cent sinking fund bonds transferred to 

the Treasury_ 312, 000. 00 

-- 1, 710, 088. 34 

Net earnings, less dividends paid : 

Earnings for 1897_ 409, 873. 37 

Earnings for 1898_ 266,746.73 

Earnings for 1899_ 295,231.77 

Earnings for 1900_ 446, 764. 68 

Earnings for 1901_ 259,590.12 

Earnings for 1902_ 295,384.40 

Earnings for 1903_ 401,068.30 


Less dividends: 

1901, 2 per cent 

1902, 4 per cent 

1903, 8 per cent 


2, 374, 659. 31 


$140, 000 
280, 000 
560, 000 

980, 000. 00 


First mortgage 44 per cent bonds redeemed and can¬ 


celed : 

October 1, 1898, 141 bonds_ 141, 000. 00 

October 1, 1899, 140 bonds_ 140, 000. 00 

October 1, 1900, 139 bonds__T._ 139, 000. 00 

October 1, 1901, 141 bonds_ 141, 000. 00 

October 1, 1902, 140 bonds_ 140, 000. 00 

October 1, 1903, 140 bonds_ 140, 000. 00 


1, 394, 659. 37 


841, 000. 00 


4, 533, 213. 50 

DEBITS. 


Worn out equipment (less value of usable parts), 
viz: Locomotives, cars, lighters, and water boat, . 

written off 1897-1903- 252, 969. 38 

Expenses incident to the retirement of the general 
mortgage 7 per cent bonds due October 10, 1897, 
and the issuance of the first mortgage 44 per cent 

bonds replacing the former in part- 27,128.13 

IJncollectable accounts written off and adjustment of 

sundry accounts, 1897-1903, net- 61,186. OS 

- 341, 283. 59 

Balance to credit of profit and loss December 

31, 1903_ 4,191, 929. 91 

S. Deming, Treasurer. 


February 17, 1905. 


































100 


INVESTIGATION OF PANAMA RAILWAY COMPANY". 

Mr. Townsend. Before we reach this analysis, and in connection 
with it, Mr. Drake, I will ask you this: When you paid the dividends 
for 1902 to the stockholders of the company, did you sell or reissue 
any of the bonds which were being held in the treasury up to that 
time? 

Mr. Drake. No, sir. . 

Mr. Townsend. Did you have cash in sufficient amount to pay that 

dividend ? „ , , 

Mr. Drake. Yes, sir. It was paid out of current cash. 

Mr. Townsend. What? 

Mr. Drake. It was paid out of current cash. 

Mr. Townsend. You have not issued any bonds, as I understand 

you, of any character since 1897? ,, ~ , 

Mr. Drake. No. There was only one issue of the bonds, the hrst 
mortgage 41 per cent bonds. There was an authorization for the 
issue of 4,000. * 

Mr. Townsend. Four thousand or four million? 

Mr. Drake. Four thousand $1,000 bonds, amounting to $4,000,000. 

Mr. Shackleford. The current cash out of which you paid the 
dividends was cash that had been derived from the sale of the bonds 
of the company? 

Mr. Drake. You will see from the schedule I have presented that 
we could not have paid dividends with proceeds of bonds, for we 
state specifically how we otherwise disposed of those proceeds. Here 
is the schedule: tc Current cash ” is the general receptable for cash 
from all sources. For instance, the Panama Railroad Company had 
night before last, when I left the office, $500,000 in cash, in addition 
to its free bonds, $773,000. 


Exhibit 6 J. 

Memorandum concerning sale of 4 1-2 per cent bonds. 


How issued or disposed of: 

Bonds sold to retire 7 per cent bonds and proceeds so applied-2, 000 

Bonds sold account La Boca wharf and proceeds so applied-1, 087 

Bonds sold account rebuilding ships and proceeds so applied- 265 

Bonds balance in hand (one since called and redeemed)- «648 


Total authorized issue_4, 000 

Present standing or location of bonds: 

Bonds in hands of public--2, 372 

Bonds redeemed by trustees__ 981 

Bonds in Treasury by purchase_ * * 6 21 

Bonds in treasury---- 6 626 


Total authorized issue__4, 000 


Mr. Shackleford. In that fund of current cash tvas contained 
money received from bonds issued to build that wharf? There was 
an excess of cash over and above the cost of building the Boca wharf 
extension, and that was a part of the cash out of which you paid a 
dividend ? 


o 22 of these were drawn by the trustees for redemption October 1, 1904, thus 

leaving 626 unissued bonds in treasury, as per following statement: 

& 647,000. 















INVESTIGATION OF PANAMA RAILWAY COMPANY. 


101 


Mr. Drake. It was an excess ($119,000) of proceeds from the sale 
of bonds sold to provide money to pay the contractor. That was 
covered into “ cash, 1 ’ naturally, because the bonds represented the 
eearnings that had been used for construction, and the 119,000 was 
passed into cash. 

Mr. Esch. Did you not issue $265,000 for the repair of the 
steamers ? 

Mr. Drake. I spoke of an authorized issue of 4,000. The emission 
up to that total has continued at various times and includes 265 bonds 
issued for the rebuilding of the steamers. 

Mr. Shackleford. How much was that? 

Mr. Drake. Four thousand bonds, or $4,000,000, which replaced 
the 4,000,000 sterling 7 per cent loan. 

Mr. Shackleford. Of the outstanding bonds against the company, 
how many are there? 

Mr. Drake. Of the outstanding bonds against the company, 2,372, 
$2,372,000. 

Mr. Shackleford. They go to make this credit to profit and loss ? 

Mr. Drake. No, sir. 

Mr. Townsend. Can you turn to that page there to which I have 
referred ? 

Mr. Drake. Yes, sir. 

Mr. Townsend. Will you please analyze that proposition for us, 
and tell us what that balance of $4,191,929.91 is composed of? 

Mr. Drake. It is made up of the- 

Mr. Townsend. What page are you reading from ? 

Mr. Drake. From page 13 of one of the exhibits. At the time of 
the redemption of the 7 per cent sterling bonds the company applied 
$705,000 cash as a contribution to the redemption of the outstanding 
mortgage. There were something like $3,000,000 of bonds outstand¬ 
ing, and they had to be redeemed. 

In anticipation of the maturing of that debt, the company, which 
has always been extremely conservative, had voluntarily provided a 
sinking fund, and had piled up liquid assets to meet that indebted¬ 
ness; and, in addition, 2,000 of the 4,000 4^ per cent bonds authorized 
were sold, and from that sale the company contributed sufficient to 
exterminate that indebtedness, to redeem and cancel the outstanding 
bonds. This first item of $705,000 was the contribution made at that 
time. 

Mr. Townsend. In cash? 

Mr. Drake. Yes, sir; in cash. I would like to impress it upon the 
committee that that fund was established voluntarily, and the secur¬ 
ities remained within the company’s control absolutely. 

Mr. Townsend. What effect did that have on this item of $4,000,- 
000? You parted with the cash. Have you canceled the bonds? 

Mr. Drake. We canceled the bonds that were paid; yes, sir. 

The Chairman. How is that? 

Mr. Drake. We destroyed the 7 per cent sterling bonds that were 
retired. 

Mr. Townsend. How could you carry that as an item to the credit 
of the profit and loss account? 

Mr. Drake. The $705,088 was a contribution from earnings, and 
was used to liquidate a capital indebtedness. It was part of the net 
earnings of the company. 



102 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

Mr. Townsend. So that this item which you have stated—if not 
to-day, at some other time—is acceptable for the payment of divi¬ 
dends, is composed of a book account ? 

Mr. Drake. Not necessarily of a book account. It shows in this 
total to which the stockholders are legally, I might say and morally, 
entitled, because it was out of earnings. 

Mr. Townsend. How would they manage to pay a dividend if you 
wanted to rely on that alone ? 

Mr. Drake. If that method were to be adopted by the directors, as 
has been done in the history of the company, to issue a scrip dividend. 
As a matter of fact, there was nothing of that kind done, however. 
It has nothing to do with the dividends that have been declared. 
They were declared out of earnings. It is a record of credit to be 
proud of, I assure you, gentlemen. You might ask what has become 
of the property cost of $7,000,000 in the outset. You might ask what 
there is to show for the cost. You would be entitled to something to 
represent that cost. That you have got this large surplus over the 
$7,000,000 and debt is due to the conservative manner in which the 
property has been managed. 

Mr. Townsend. I see that; but is this item an item that can be used 
for the payment of dividends ? 

Mr. Drake. Yes, sir. 

Mr. Townsend. Tell me how you could use that payment of $705,- 
000, which represented cash that you had taken out of the treasury, to 
redeem the sterling bonds to that amount and cancel them ? 

Mr. Drake. I answered that once, and I can answer it again by 
saying that you reduced the mortgage indebtedness on your property. 
The cost of the property had to be charged to capital account. You 
reduced the lien against the property, as you had placed a mortgage 
on it and issued bonds for it, and it came, by the action of your 
directors/to pass to your shareholders the increment which they were 
entitled to as shareholders in excess of the original cost. It is done 
continually. It has been done; it is a common practice of corpora¬ 
tions. 

The Chairman. That would be true when you paid off the bonds 
with earnings; but suppose that you paid from the results of other 
sales of bonds, is it then equally true ? 

Mr. Drake. No, sir; for that would be paying an indebtedness 
with an indebtedness. 

The Chairman. Certainly. Was not some portion of this sum the 
result of the sale of bonds ? 

Mr. Drake. No, sir. 

The Chairman. I thought you said tAvo millions of the four mil¬ 
lions of the 44 per cent bonds were sold? 

Mr. Drake. Excuse me. That refers to a later date. That was 
# subsequent to this payment. 

The Chairman. I understood you to say that this was cash ? 

Mr. Drake. Yes, sir; cash ive took out prior to the maturing of the 
7 per cent sterling loan. The company had made a practice of invest¬ 
ing in outside securities and in its own securities, buying them in the 
open market for investment of its surplus earnings. For instance, 
we have iioav $22,000 of the 4^ per cent bonds that Ave bought in the 
open market. We considered them a good investment and Ave bought 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


103 


them. We have at the same time $126,000 of the subsidy 6 per cent 
bonds, which were acquired in the same way prior to the liquidation 
of the 7 per cent sterling bonds, and as the sale of part of those 
securities was necessary at that time to produce cash, the proceeds 
were applied to the liquidation of the 7 per cent sterling mortgage 
bonds. Some slight residue remained and it was carried into liquid 
cash, where it belonged. No evidence of that accumulation was ever 
issued to the shareholders. The mortgage indebtedness which before 
that had been a four million dollar indebtedness was reduced to a 
two million dollar indebtedness, as a result of such application of 
earnings. Unquestionably the stockholders were entitled to some- 
ihing to represent their earnings on their invested capital if the usual 
course adopted by corporations had been followed. Instead they 
have been carried through the annual balances to this profit and loss 
account, and if to-day it were part of the ‘policy of the board of 
directors, this entire amount that shows to the credit of the profit and 
Joss account could properly be issued to the stockholders. 

Mr. Townsend. Now, will you explain the next item—the 7 per cent 
mortgage bonds? 

Mr. Drake. It follows along in the same way. They were in the 
voluntary sinking fund and had been acquired with cash out of 
earnings. 

Mr. Townsend. Before they were due? 

Mr. Drake. Yes, sir. They were held as an investment in the 
treasury of the company prior to their maturity. 

Mr. Townsend. Are they in there now ? 

Mr. Drake. No, sir; they were contributed for redemption of the 
sterling mortgage in 1897. 

Mr. Townsend. How ? 

M % r. Drake. The bonds at their face value were contributed toward 
the payment of the 7 per cent mortgage. 

Mr. Townsend. So that that item of $693,000 is not now included 
in this balance of profit and loss ? 

Mr. Drake. Yes, sir; it is, because earnings were taken for their 
purchase. 

Mr. Townsend. Now, take the next item. 

Mr. Drake. It is a similar case. The accumulations held in the 
treasury included three hundred and twelve of the company’s 6 per 
cent subsidy bonds bought with earnings. 

Mr. Townsend. Is any part of that $312,000 now in the Treasury ? 

Mr. Drake. $126,000'of that lot of bonds are in the Treasury to¬ 
day. 

Mr. Townsend. So that is included in that item ( 

Mr. Drake. Yes, sir. 

Mr. Tow^nsend. How about the additions to the property f 

Mr. Drake. If you will turn to page No. 7, additions to property, 
the aggregate outlay for that purpose is stated there. That is, ap¬ 
proximately. Of course there are many other items of smaller 
amount that are not added. It represents the additions that have 
been made to the permanent construction of the road—$1,2(8,UUU. 

Mr. Townsend. It is part of the capital? 

Mr. Drake. Yes, sir. , , „ 

Air Townsend. Now, that is carried at that full amount in this 
item, is it—the $1,278,210.84, which you say is estimated? 


104 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Drake. No, sir; I said there were smaller items that might 
not be included. It represents the principal additions, all that are 
chargeable to capital account. 

Mr. Townsend. Now, the next item is the redemption of Panama 
Railroad Company 4J per cent first mortgage bonds, $981,000. 

Mr. Drake. Yes, sir. 

Mr. Townsend. What is the condition of those? Are they in the 
treasury now ? 

Mr. Drake. They are canceled. 

Mr. Townsend. And they are not in the treasury ? 

Mr. Drake. Not in the treasury. But the money has been ex¬ 
pended from earnings to redeem them every year, as I stated a mo¬ 
ment ago. 

Mr. Townsend. So that is the same condition as the $705,000? 

Mr. Drake. Yes, sir; it is a contribution from cash. 

Mr. Townsend. The next item is $21,987.50. Panama Railroad 
Company’s first mortgage 41 per cent bonds. Are they still in the 
treasury ? 

Mr. Drake. Yes, sir. They were bought in the open market and 
are in the treasury as a liquid asset. 

Mr. Townsend. You wrote out of that a depreciation of equipment? 

Mr. Drake. That is for equipment and material which is destroyed 
or becomes so worn out and can not be reconstructed. 

Mr. Townsend. That is the only way that you count depreciation, 
when it can not be used ? 

Mr. Drake. Yes, sir; that is destroyed and thrown on the scrap 
heap; for we maintain it otherwise as a current operating expense. 

Mr. Townsend. Them it can not be used? 

Mr. Drake. No, sir; unless it be sold as “ scrap.” 

Mr. Townsend. Do you write off every year a certain amount for 
depreciation of your equipment aside from that that is actuallv 
worthless ? 

Mr. Drake. No, sir. On the other hand, we have made large 
expenditures each year to keep up the equipment. 

Mr. Townsend. Do you not add to your capital when you do that? 

Mr. Drake. No sir; that outlay is charged to operating expenses 
and maintenance of plant—hence if a lighter were lost, or a car 
were destroyed, or a train were ruined so that it was absolutely use¬ 
less, its cost, if not replaced, would be “ written off ” to profit and 
loss account, and if replaced would be charged to operation. 

Mr. Townsend. And you would deduct from that anything that 
was lost ? 

Mr. Drake. Anything that was reconstruction we would charge to 
capital account, and anything that was not permanent improvement, 
to operating expense. 

Mr. Townsend. Would you deduct the article that was actually 
destroyed, or deduct its cost price ? 

Mr. Drake. We deduct the cost as it stands on the books. I can 
best illustrate what I want to say by answering your questions. We 
have 22 lighters in the Bay of Panama which are of the capacity of 
from 50 to 150 tons. If any one of these becomes useless and is 
destroyed, failing to find the individual invoice in the records, we 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 105 

have to approximate by taking an average cost and write off the value 
so established. 

Mr. Townsend. Now, you said a while ago that you keep your 
equipment up to par all the time? 

Mr. Drake. Yes, sir: there are no complaints regarding its con¬ 
dition, despite its age. 

Mr. Townsend. And you do have something once in a while that 
you have to destroy entirely? 

Mr. Drake. Yes, sir; such as lighters and cars. 

Mr. Townsend. Lighters and tugs, and so forth? 

Mr. Drake. Yes, sir. Those are what you will find written off. 
I have in mind two or three lighters and a tug in the Bay of Colon. 
Then cars are destroyed, and things of that kind. 

Mr. Townsend. As I understand it, looking at page 13 of Exhibit 
No. 6, the only item aside from cash, possibly, is the second item of 
$693,000, and that does not appear in your balance of profit and loss. 

Mr. Drake. I do not think I said so, sir. I think it does appear. 

Mr. Townsend. I understood you to say that that had been dis¬ 
posed of now. 

Mr. Drake. No, sir. We applied $693,000 of accumulated earn¬ 
ings to the purchase of the $693,000 T per cent sterling bonds, and we 
had them in the treasury prior to the redemption of the bonds. 

Mr. Townsend. What I mean now is that you have redeemed the 
bonds, so that is no longer an item in that balance sheet ? 

Mr. Drake. The indebtedness was paid at that time with current 
earnings and the proceeds of the sale of 2,000 first mortgage per 
cent gold bonds. 

Mr. Townsend. Now, aside from that item and your dividends 
which you have declared since December 31, 1903, your balance sheet 
of 1904, or of November, 1904—that is the latest that you have, I 
believe—for eleven months; you have it only for eleven months? 

Mr. Drake. That is all. The returns for the year are not all in. 

Mr. Townsend. Then what should that balance be to the credit of 
profit and loss in November, 1904? 

Mr. Drake. I have not the balance- 

Mr. Townsend. Let us assume that you have it, and just answer 
this question. Your balance of 1904 would be a balance; would it 
be the balance of December 31, 1903, less the dividends you have paid 
out, and item No. 2 on page 13 of Exhibit 6, $693,000? 

Mr. Drake. It would be the balance shown in the report of 1903, 
plus the earnings to April 1, 1904. and less the amount of disburse¬ 
ments during same period of 1904. 

Mr. Townsend. Now, what disbursements would you take out of 
that? 

Mr. Drake. Such disbursements as for dividends and operating 
expenses, appropriations for depreciation, fixed charges, uncollectible 
monej^s, and items of that kind. 

Mr. Lovering. Is there not $150,000 for sinking fund taken out? 

Mr. Drake. That is for the redemption of 4J per cents. 

Mr. Townsend. Does that come out, too ? 

Mr. Drake. The proportion of that would be credited. 

Mr. Townsend. Now, I think I asked you some questions the other 
dav. but I notice that our examination at that time was interrupted 



106 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


frequently by different people testifying, so that I do not know ex¬ 
actly who was testifying. 

Mr. Drake. I have every desire to have you get all the informa¬ 
tion. . ‘ 

Mr. Townsend. Yes; that is all right. We will get it all right. 
Now, you first had negotiations with the Government, who submitted 
a proposition for the purchase, or the Panama Canal Company did 
submit a proposition for the purchase of their property in the spring 
of 1902, as I understand it? 

Mr. Drake. You will please understand that I represent only the 
railroad company. I had nothing to do with this negotiation. 

Mr. Townsend. Perhaps Mr. Cromwell did. 

Mr. Drake. And I would like to emphasize the fact that the auton¬ 
omy of the railroad company has always been maintained. The 
canal company stood in the same position the United States Govern¬ 
ment has maintained, as the holder of the majority of the shares. The 
operation of the railroad company has been always entirely untram¬ 
meled by the canal company. We have sought the advice, at times, 
and sometimes indication of the wishes, of so large a majority of 
shareholders; but the company has always been administered accord¬ 
ing to the wisdom of the board of directors, and I again take this 
opportunity to refer to the record with pride. We have a valuable 
property, and we think it has been wisely and conservatively admin¬ 
istered. 

Mr. Townsend. Now, I want to know whether you can not, in the 
next few days, make out and submit to the committee a full, itemized, 
complete statement of all of the expenses as shown in your office in 
New York?. You have that all here? 

Mr. Drake. Yes, sir; but I have it here for eleven months only. 

Mr. Townsend. You have not that itemized statement ? 

Mr. Drake. Such as a subdivision going back to the subdivision 
of the items that you have already spoken of during this session? 

Mr. Townsend. Yes, sir. 

Mr. Drake. I would have to work that out. I would be very glad 
to do that if you want it. 

Mr. Townsend. I would like to have you furnish a full statement 
of the amount that is paid to the officers and individual officers, includ¬ 
ing fees. 

Mr. Drake. I can give you all that excepting in regard to the fees. 

Mr. Townsend. We were speaking a while ago of the fact that you 
had an item given to Mr. Cromwell, that the estimate showed you had 
given to Mr. Cromwell $10,000, in addition to his salary, for the legal 
department. 

Mr. Drake. No, sir; I said including the item of his retainer. The 
item for the eleven months was $6,667.90. 1 could give you the details 
of how that excess arose. Of course, in an eleven months’ summary 
eleven-twelfths of $6,000, or $5,500, Avould be charged to that retainer, 
and the balance would be chargeable to the details which I can give 
you if you want them. 

Mr. Townsend. Do you refer to the accounts ? 

Mr. Drake. Of course our accounts are itemized to the cent. I 
have here the details of everything but the minute details. 

Mr. Townsend. Are you going to leave that memorandum with the 
committee ? 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 10T 

Mr. Drake. Yes, sir; but I do not want to surrender it until we get 
through with it. 

Mr. Townsend. What provision have you for the purchase of coal ? 

Mr. Drake. Bids are invited about March 15 of everv year from 
several large coal concerns. We also receive various other bids. We 
receive bids from representative concerns for supplying our coal re¬ 
quirements for the ensuing twelve months, and the lowest bid is 
accepted, consistent with the quality required. 

Mr. Townsend. Do you buy it from one firm, usually? 

Mr. Drake. It is a case of the survival of the fittest. We have 
bought our Isthmus supply for the last five years mainly of the Poca¬ 
hontas Coal Company. 

Mr. Townsend. How much coal do you use? 

Mr. Drake. We contract for 50,000 tons, and use something ap¬ 
proximating that. 

Mr. Townsend. Has there been any change in the method of let¬ 
ting your coal contracts since the summer of 1902 ? 

Mr. Drake. No, sir. 

Mr. Townsend. Has there been any change in the price? 

Mr. Drake. No, sir. We contracted at $2.65 per ton f. o. b. Nor¬ 
folk, and it was understood that if there was any reduction in the 
selling price to other parties the company should have the benefit of 
that, and the price has been reduced by that process to $2.50 per ton. 

Mr. Townsend. So that you are paying what now? 

Mr. Drake. Three dollars a ton for bunker coal for the steamers. 
For the Isthmus supply I said that we had used about 50,000 tons— 
We contracted for 50,000 tons. W r e have the right to call for coal in 
quantities as required, up to that quantity, on ten days’ notice, so 
that we call for it as needed; and we have used now during the cur¬ 
rent year something like 35,000 tons, and that has been shipped, and 
the cost is reduced to $2.50 a ton. 

Mr. Esch. You are a dealer in coal in the Isthmus, are you not? 

Mr. Drake. On the Isthmus, we are. As that question is raised, I 
may say that nothing in our concession or charter provides that we 
may be in business commercially. As we always have a large supply 
of coal on hand to meet emergencies, gradually our practice of selling 
coal has developed. We sold it until there was a renewal of com¬ 
plaint bv some of the local merchants that we were invading their 
mercantile rights, and we decided to discontinue the sale or coal. 
We did so, and within a week after that the Government, the 
merchants, and connecting lines besought us to resume the selling of 
coal. 

Mr. Esch. What government? 

Mr. Drake. The Government of the Department of Panama. 

Mr. Esch. Have you an account of how much coal you sell? 

Mr. Drake. Yes, sir. 

Mr. Esch. Is that in any of the information that you have fur¬ 
nished to the committee ? 

Mr. Drake. No, sir; but I can furnish it if you want it. 

Mr. Esch. I think that it would be desirable. 

Mr. Drake. I can say that the profit on the sale of coal by the 
railroad company amounted last year to about $35,000, because a 
large amount of it was used. We have an arrangement with the 
United States Government by which we furnish its ships with coal 


108 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

on application. We had an arrangement with the Colombian Gov¬ 
ernment. which was succeeded to by the Panama Government, to sell 
them coal at the same price as to the United States Government. We 
sell to any ship there in need of coal, but, of course, at a different 
price. We sell to local consumers, but at a higher price. We sell to 
the United States Government at the same price as we do to our own 
departments. 

Mr. Esch. Then, when you charged yourself with the account of 
$111,000 in 1901, it says simply “ expense.” 

Mr. Drake. That covers the coal bought in New York for the ships. 

Mr. Esch. And also there is an account for the same year for 
$44,000 for fuel for locomotives. 

Mr. Drake. That is a subdivision of expense at the Isthmus? 

Mr. Esch. Yes. 

Mr. Drake. Applicable to the railroad. Those are two classes of 
coal. 

Mr. Esch. Have you any separate account of the fuel that you sell ? 

Mr. Drake. It can be taken out of the account. There is a regular 
credit on the books from the sale of coal. 

Mr. Esch. But that account is segregated in the annual account, is 
it not ? 

Mr. Drake. No, sir. It shows at the foot of profit and loss, or 
rather in the balance sheet it would show as profit on the sales of 
coal—sale of materials; it is a separate item. 

Mr. Townsend. There is one question that ought to have been 
asked a little earlier. The testimony of Mr. Simmons, I think, was 
to the effect that the list of officers which you handed us who were 
elected at the last annual meeting was shown on page 1 of your 
annual report for 1903. 

Mr. Drake. The report, Mr. Townsend, shows the status of the 
previous year. 

Mr. Townsend. Yes. 

Mr. Drake. And any changes from that would show in the first 
page of the report for the current year. 

Mr. Townsend. Now I want to call vour attention to this. 

Mr. Drake. I have a memoranrum here that I am going to leave 
with the committee. 

Mr. Townsend. Let me see that, if you please. 

Mr. Drake. I will have this prepared in better shape, if you like 
[handing paper to Mr. Townsend]. 

Mr. Townsend (after examination of paper). This includes the 
present officers? 

Mr. Drake. All those marked with a dash are the present officers. 

Mr. Townsend. Those marked with a dash? 

Mr. Drake. Yes. You asked for the record of the changes during 
the current year. That shows the officers elected at the'beginning of 
the year, and it shows the changes that have been made since then. 

Mr. Townsend. So that the present officers are Mr. Simmons- 

Mr. Drake. Yes, sir. 

Mr. Townsend. Mr. Drake, Mr. Felton, Mr. Parker, Mr. Cromwell, 
and Mr. Brown, Admiral J. G. Walker, General Davis, Mr. B. M. 
Harrod, Mr. W. II. Burr, and Mr. C. E. Grunsky ? 

Mr. Drake. Yes, sir; they with Mr. Parsons make 12, and there is 
a vacancy because of the resignation of Mr. Hecker. 



INVESTIGATION OF PANAMA RAILWAY COMPANY. 109 

Mr. Townsend. He resigned November 23, 1904? 

Mr. Drake. Yes, sir. 

Mr. Townsend. What did he do with his share of stock? 

Mr. Drake. It stands to his name on the books. 

Mr. Townsend. He never paid anything for that stock? 

Mr. Drake. That I do not know anything about. 

Mr. Townsend. Did any of these commissioners- 

Mr. Drake. Admiral Walker, the chairman of the Canal Commis¬ 
sion, bought 100 shares of stock in the market, and out of that trans¬ 
ferred one share to each director, replacing shares that they had 
qualified with before. 

Mr. Townsend. Did Admiral Walker buy that stock for himself? 

Mr. Drake. Those shares stand in his name as chairman of the 
Commission. They were paid for with a warrant upon the assistant 
treasurer in New York. 

Mr. Townsend. So that he holds them for the United States? 

Mr. Drake. Yes, sir. 

Mr. Townsend. And all these other gentlemen who are members 
of the Canal Commission, and are now directors of the company, 
hold their shares individually? 

Mr. Drake. They are in their individual names. 

Mr. Townsend. Do you know whether or not anybody except 
Admiral Walker paid anything for his shares? 

Mr. Drake. I do not. 

Mr. Esch. Are the dividends paid to Admiral Walker and to the 
other members of the Commission ? 

Mr. Drake. Yes, sir; they would be, regularly. By the by-laws of 
incorporation they have to be shareholders to be elected directors, so 
that I know they were qualified before they were elected. 

Mr. Esch. Have they received any dividends? 

Mr. Drake. Yes, sir. 

Mr. Esch. The checks were made to them individually ? 

Mr. Drake. Yes, sir. The corporation always sends checks to the 
party in whose name the stock stands. 

Mr. Esch. To whom was the Walker check issued? 

Mr. Drake. To Admiral J. G. Walker, as chairman of the Com¬ 
mission. 

Mr. Esch. That was in the check, was it? 

Mr. Drake. Yes, sir. That is the way he stands in the records 
of the company as a stockholder, as chairman of the Commission; 
and the Secretary of War, in whose name a majority of the shares 
are placed, is also designated officially. 

Mr. Esch. Now, Mr. Shaler has resigned down there as superin¬ 
tendent ? 

Mr. Drake. Yes, sir. 

Mr. Esch. And you have not filled the vacancy ? 

Mr. Drake. No," sir. The assistant superintendent is now acting 
superintendent. 

Mr. Esch. Does Mr. Prescott, who is acting as assistant superin¬ 
tendent, get the same salary that Mr. Shaler got ? 

Mr. Drake. No, sir. 

Mr. Esch. He is now receiving the same salary as when he was 
assistant superintendent? 


110 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Drake. Yes, sir. That position should be filled, one way or 
the other, for the good of the service, very shortly. 

Mr. Esch. Have you a list of the total expenses, so that you could 
itemize it, for the Panama end ? . ' 

Mr. Drake. Yes, sir. May I ask with what particularity? 

Mr. Esch. The items for the payment of salaries and fees to men 
who live there in the employ of the company. 

Mr. Drake. There are no fees there. 

Mr. Townsend. You transfer your expenses for operating the road 
directly to the New York office? 

Mr. Drake. Yes, sir. 

Mr. Townsend. And that is reported here? 

Mr. Drake. Yes, sir. 

Mr. Townsend. These dates which are on the slip which you have 
given me here show when the former directors resigned and when the 
new ones were elected ? 

Mr. Drake. Yes, sir. 

Mr. Townsend. How were they elected ? 

Mr. Drake. By action of the board. By formal resignation of the 
director and election of his successor. 

Mr. Townsend. Have you had any meeting of the stockholders for 
the election of directors since the- 

Mr. Drake. No, sir; that will come on the 3d of April. 

Mr. Mann. How many directors are elected ? 

Mr. Drake. Thirteen are elected annually. The charter of the 
corporation provides for that. 

Mr. Mann. Do you know who is to represent the stock held by the 
United States at that meeting? 

Mr. Drake. I have not an idea. 

Mr. Esch. Does the evidence disclose that the cost of the New 
York office is about $90,000 ? It does, does it not ? 

Mr. Drake. Yes, sir, $91,641.98. 

Mr. Esch. I notice in the annual account that you have a separate 
account for agency expenses? 

Mr. Drake. Yes, sir; steamship agency expenses. 

Mr. Esch. For instance, in the year 1901 there was paid as salaries 
of agents and clerks $29,000. Is that exclusive of the $90,000? 

Mr. Drake. It is shown under the general heading “ Steamer 
expenses?” 

Mr. Townsend. Yes, sir. 

Mr. Drake. Please look at page 19 of the annual report for 1901; 
you can get a general notion. 

Mr. Townsend. Yes, sir. 

Mr. Drake. For the different departments of the railroad, in the 
charging up the expenses, the local department is charged with the 
incidental clerk hire and expenses. For instance, the general office 
is charged with all of the expenses applicable to the maintenance of 
the general office. The road department on the Isthmus and the other 
departments are charged with their proportion. For instance, con¬ 
ducting, transportation, maintenance of equipment, and maintenance 
of way and construction are charged with their proportions of the 
clerk hire. 

Mr. Esch. Where are these agencies ? 



INVESTIGATION OF PANAMA RAILWAY COMPANY. Ill 

Mr. Drake. There are a New York agency and a Colon agency 
for the steamship line. 

Mr. Esch. Then the New York agency account would be exclusive 
of the $90,000? 

Mr. Drake. Entirely, sir. The total expense of operating the 
steamship line is shown by this summary of operations for eleven 
months of 1904 under the heading “ Steamer expenses Panama R. R. 
S. S. Line.” For eleven months the expenses, such as for fuel, 
repairs, stores, docking, injuries to persons, labor on cargo and coal, 
painting ships’ bottoms, stationery and printing, telegrams and 
cables, and insurance are all charged as operating expenses of the 
steamship line, and, in addition, all the expenses of the agencies of 
the steamship line in New York and at Colon are charged under 
“Agency expenses Panama Railroad Steamship Line,” and the total 
of that subdivision is included with u Steamer expense account in 
operating expense Panama Railroad Steamship Line.” The expenses 
incidental to the agency are for all advertising for the steamship line, 
rent and repair of docks and wharves, repairs, etc. When you get 
a lease from the city you are obliged to make all repairs and take all 
risks. It is a very strict lease, and the conditions are very onerous. 
I think that we have about the best dock lease in New York. We 
have a lease on which we pay only $18,000, and the company could 
lease the pier for $60,000 a year. 

Mr. Esch. Then if we discontinued this railroad office at New 
York, this agency would have still to be maintained? 

Mr. Drake. Yes; if the steamship line were continued; and that 
amounts to $94,000 for eleven months, because it includes all such 
items as I have mentioned. 

(Thereupon the committee adjourned.) 


Committee on Interstate and Foreign Commerce, 

House of Representatives, 
Washington , T). CFebruary 18, 1905. 

The committee met at 10 o’clock a. m., lion. William P. Hepburn 
in the chair. 

STATEMENT OF MR. EDWARD A. DRAKE (continued). 

The Chairman. Mr. Drake, I would like to ask you a little further 
with regard to payments for attendance upon the meetings of the 

'executive committee and the board of directors- 

Mr. Drake. Yes, sir. 

The Chairman (continuing). By members of the Isthmian Canal 
Commission. 

Mr. Drake. Yes, sir. . 

The Chairman. Do you keep a record of the meetings of the board 

of directors ? 

Mr. Drake. We do. _ 

The Chairman. Do you keep a record of the transactions at the 
meetings of the executive committee? 




13 2 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Drake. We do. sir; a full and complete record, full anci com¬ 
plete minutes of everything that is done. 

The Chairman. Have you those with you? 

Mr. Drake. No, sir. Those records are kept in very heavy record 
books. 

The Chairman. Do those records show the names of those who 
attend the meetings? 

Mr. Drake. They do, for every meeting. 

The Chairman. For every meeting. How many of the meetings 
of either the executive committee or the board of directors have been 
attended by members of the Isthmian Canal Commission? 

Mr. Drake. Nearly all of the regular meetings of the board have 
been attended bv members of the Commission since their election. 

The Chairman. Have members of the Commission, on each occa¬ 
sion, received their fees for attendance? 

Mr. Drake. They have, sir. 

The Chairman. Who, as you now remember? 

Mr. Drake. All of them except General Davis and Colonel Hecker, 
who were absent from the country. 

The Chairman. Fees at the meetings of the board of directors? 

Mr. Drake. Yes, sir. 

The Chairman. And also, were any of them members of the execu¬ 
tive committee ? 

Mr. Drake. Mr. Parsons has been a member of the executive com¬ 
mittee. 

The Chairman. Yes, sir. Did he receive his fees for that attend¬ 
ance ? 

Mr. Drake. Yes, sir. 

Mr. Esch. In that connection may I ask him a question ? 

The Chairman. Certainly. 

Mr. Esch. Are any of the members of the executive committee or 
of the board of directors nonresidents of New York? 

Mr. Drake. Members of the board of directors are, yes, sir. Mr. 
Felton, president of the Chicago and Alton Railroad, is a non¬ 
resident. 

Mr. Esch. Where there is a nonresident director, is he allowed 
mileage ? 

Mr. Drake. No, sir. 

Mr. Mann. Are there any of the members of the Isthmian Canal 
Commission who are members of your board who were ever paid their 
traveling expenses? 

Mr. Drake. No, sir; .1 may say in further answer to your question, 
Mr. Esch, that there is no nonresident member of the executive com¬ 
mittee. 

Mr. Mann. Do any of the members of the Isthmian Canal Com¬ 
mission live in New York? 

Mr. Drake. Mr. Parsons and Mr. Burr do. Mr. Parsons is a mem¬ 
ber of the executive committee. 

The Chairman. Are the meetings of the executive committee 
and of the board of directors held on the same day ? 

Mr. Drake. No, sir; except rarely. On an emergency, they might 
be, but not otherwise. The days are specified in the by-laws. 

The Chairman. And they never concur ? 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 113 

Mr. Drake. In one or two instances they have, but very rarely. 

The Chairman. When was this fee for attendance of the members 
of this executive committee and of the board of directors determined 
upon ? 

Mr. Drake. It was by resolution of the executive committee—some 
years ago. 

The Chairman. How long ago? 

Mr. Drake. Six or seven years ago. 

The Chairman. Have there been any changes in the salaries or 
compensations made to servants of the company—officers and servants 
of the company—within recent years ? 

Mr. Drake. There have been no changes in salaries to corporate 
officers. There have been some slight modifications of salaries to 
minor officials and subordinate employees. 

The Chairman. None since January, 1902? 

Mr. Drake. None since January, 1902; except, as I say, to minor 
official—subordinate employees. 

The Chairman. The salary of the president was $10,000 prior to 
that time? 

Mr. Drake. Yes, sir; almost from the organization of the com¬ 
pany. 

The Chairman. Yes, sir; that is all that I have on this subject. Can 
you furnish the committee with an itemized statement showing the 
amounts that have been paid to gentlemen who are members of the 
Isthmian Canal Commission for their attendance at these board meet¬ 
ings and at meetings of the executive committee? 

Mr. Drake. Certainly. I promised yesterday to do that, sir. I 
can do it. There is a perfectly detailed account kept of every penny 
paid to every member of the executive committee and to every mem¬ 
ber of the board. 

The Chairman. You will indicate in your statement the dividends 
paid to them, will you, if any ? 

Mr. Drake. Paid to them as stockholders of the company ? 

The Chairman. Yes, sir. 

Mr. Drake. Very well. 

Mr. Cromwell. You can furnish that Monday, can you not? 

Mr. Drake. Yes, sir. 

The Chairman. It will be practicable, I suppose, to bring the 
records of the transactions of the executive committee and of the 
board here, will it not ? 

Mr. Drake. Yes, sir; perfectly. 

The Chairman. Will you do that on Monday ? 

Mr. Drake. Yes, sir. 

The Chairman. If you please. I think that is all I want to ask in 
regard to this, Mr. Townsend. 

Mr. Esch. He was explaining in reference to the agencies when we 
closed yesterday. I think you said, Mr. Drake, that you wished to 
make an explanation with regard to that. 

Mr. Drake. Yes, sir. May I ask you for the question that was 
asked me? As I remember, it was a" question as to the apportion¬ 
ment of the steamship agency expenses. I had stated that the general 
expenses were $87,000, approximately, for the year, and I had stated 
that the expense of the steamship agency was an expense apart, and 

PAN RY— 05 -8 


114 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


charged directly to operation of the steamship line. And I was 
explaining the items that went to make up the total of $95,000, 
charged to agency expenses of the steamship line for eleven months of 
1904. It is by the addition of these two items that the mistaken esti¬ 
mated aggregate of $200,000 expenses is made. I showed that the 
expenses of the steamship line were composed of the rent of buildings 
and wharves, and repairs of wharves, and the other miscellaneous 
expenses which I recited; and the point was that the difference is 
between the general expenses and those of the steamship agency 
expenses. The whole of the expense of the steamship line and agency 
is charged to the operation of the line, and the net steamship result 
developed in that way. 

Mr. Esch. Did you ever maintain an agency at Paris ? 

Mr. Drake. Yes, sir. 

Mr. Esch. Do you maintain it now ? 

Mr. Drake. No, sir. It was discontinued at the time of the resig¬ 
nation of Mr. Whaley. When he returned to Paris he resigned the 
active management and control of the company here, but retained his 
position as first vice-president, and Avas placed in charge of the Euro¬ 
pean department. It Avas a very important department, in that there 
are eight steamship lines from Europe that connect with the Panama 
Railroad at Colon, and a great many questions continually arise that 
need consideration and adjustment. Conferences are held to fix rates 
for the carriage of the principal products, which agents of all of the 
lines attend. Mr. Whaley was always there, and besides attended to 
the business of the company in Europe, in general. 

Mr. Esch. Do you maintain an agency at San Francisco? 

Mr. Drake. We have a minor agency at San Francisco. The Pan¬ 
ama Railroad Company is a line engaged in commerce with, in effect, 
the entire world. We have eight steamship lines connecting with us 
at Colon on the Atlantic side, and each line has its home port. By 
meetings of the representatives of these lines there are frequent con¬ 
ferences to determine how the joint business shall be carried on under 
the traffic arrangement between this company, these lines, and other 
lines which come to Panama. As I said, there are eight lines on the 
Atlantic and three lines on the Pacific, and the aggregate of the busr 
ness has developed progressively since the railroad company escaped 
from all restraint it Avas under and assumed a dominant position in 
the commerce passing across the Isthmus. To illustrate, Ave may say 
that instead of being only the hinge of a nutcracker, it is the whole 
nutcracker, and is able to control its own business. The foreign in¬ 
terests of our business AA r ere protected by the vice-president in charge 
of the European department. 

Mr. Esch. If you discontinued your steamship line, would that 
affect your contracts with European lines? 

Mr. Drake. Not with European lines. 

Mr. Esch. They would remain ? 

Mr. Drake (continuing). They would remain; but if the line Avere 
discontinued it Avould be reversionary in that it Avould restore the 
dominance and the opportunity to dictate to the railroad company 
Avhich was previously held by these lines. We have escaped from 
that within the last feAv years and established a position in which the 
limits under which they can do business Avith us are defined, the limits 
of the reductions in rates are established, and the conditions under 


INVESTIGATION OF PANAMA KAILWAY COMPANY. 


115 


which they must do the business with us are enforceable, through our 
line, which has been progressively developed as a feeder of the rail¬ 
ed every year, and has been used as a threat—I do not say that 
offensively as a means that can be resorted to to compel the strict 
observance of the conditions by the European lines; because with our 
line we have always .a way of doing the business ourselves. Before 
we obtained that position they often left us with three or four or five 
hundred cars blocked with merchandise, which they would fail to 
move as rapidly as required. We have had our bills of lading so 
amended that the railroad is in a position to say “ Move that cargo at 
once, or we will move it/' Thus we are in control. So that, as I sav, 
in relation to European lines the policy of discontinuing the Atlantic 
Steamship Line Would be reactionary, reversionary, and destructive. 
I use those terms in a commercial sense. I have been engaged in these 
interests of the company for the last fifteen years, and there is not a 
feature of it that does not show progress. 

Mr. Esch. Now, you state that the Panama Railroad is a regulator 
of intercontinental rates? 

Mr. Drake. Yes, sir. 

Mr. Esch. What proof have you of that ? 

Mr. Drake. For fifteen years, from 1878 to 1893, under the con¬ 
tract that we had with the Pacific Mail, by which we received a lump 
sum for the business we did; for that company this railroad only 
obligated itself to transport the cargo that was brought to it. The 
Pacific Mail did not canvass thoroughly for business. But the mo¬ 
ment that that contract expired we purchased steamers and established 
our own line on the Atlantic, and they have been in service ever since, 
and we began to steadily develop that business, and by having an 
active, interested, speedy, and direct service to the railroad its tonnage 
has grown enormously. The whole business to the north of Panama 
was small. Now the business to San Francisco alone is 15 per cent 
of the business of the steamship line and 25 per cent of the business 
of the railroad company, and constitutes 50 per cent of the revenue 
of the country. It should not be forgotten that the Panama Railroad 
Company was the original transcontinental line, and its business has 
grown and its rates have been reduced from $25 a ton and per pas¬ 
senger in years past until now they are about $4.50 a ton and per 
passenger under our new local tariff. The business is increasing, 
but the equipment has not been increased proportionately. That is, I 
mean we have been able to handle what is a mere bagatelle to a 
trunk line here, but is an enormous tonnage for a railroad on the 
Isthmus 48 miles long. We have handled 400,000 tons a year over 
that railroad. That total has been transported by steamers to our 
terminals and taken off', transported across the Isthmus, and placed 
on steamers on the other side. And the “ cargo loss and damage ” 
in that service is only a fraction of 1 per cent of the total earnings, 
something exceptional in the history of railroads. I speak of that 
to the credit or the men on the Isthmus. Our headmen there are 
active white men, Americans, etc., who were engaged here. Every 
employee of the company who handles the funds of the company is 
bonded. Our traffic with points north of Panama on the Pacific coast 
has developed and is carried from Panama on under our contract with 
the Pacific Mail Steamship Company. We may assume, being practi¬ 
cally owned by our chief competitor, the Southern Pacific Railroad 


116 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Company, is not in business with us disinterestedly. We forced the 
Pacific Mail, as it did us for years, until we regained our independ¬ 
ence, when amicable relations were established. It is unfortunately 
true that the Pacific Mail Steamship Company is the only American 
line operating to the Isthmus on the Pacific side, as our line is the only 
American line operating on the Atlantic. Thus the withdrawal of 
either one of them would terminate through traffic under the Ameri¬ 
can flag. We have at different times in the past been allied with the 
Pacific Mail and severed from them and again allied with them, and 
are now about to be severed from them. We have established our 
own line on the Pacific side in order to get freedom from the Pacific 
Mail, and it resulted in large loss to us and to them. They have a large 
steamship tonnage on the Pacific side and have their agencies and 
plants all along the littoral, and we have been compelled again to 
renew our connection with that company in order to escape loss and 
obtain what is absolutely requisite, a direct, speedy, and certain con¬ 
nection in order to attract business from the transcontinental lines. 
Our rates are always at a cut of from 20 to 30 per cent (or more, as 
may be necessary) to secure the business. Our ships are running 
regularly and full now; in fact, if the line is to be continued we should 
have ships of modern construction and more roomy, as our ships are 
barely adequate for the tonnage we are carrying now, but the business 
of the line is growing. Our opposition and that of the American- 
Hawaiian Steamship Line via Magellan to the transcontinental line 
is the only opposition they have. The Morgan Line from New York 
belongs to the Southern Pacific Railroad, one of the transcontinental 
lines, with which it connects at New Orleans. 

Our route is thus a controlling factor, because through it a shipper 
is able to secure a favorable transcontinental rate. 

The Chairman. You can not compete with the transcontinental 
lines on fruit shipments from California ? 

Mr. Drake. On dried fruit. We do not handle the fresh fruit. 

Mr. Mann. What reduction has been made on transcontinental 
rates within the last ten years ? 

Mr. Drake. The transcontinental rates, I believe, used to average, 
before 1895, $18 per ton on the total seaboard traffic. As to present 
transcontinental business, while I can not speak certainly about 
them, I believe the average rate has been reduced to $14. Our traffic 
manager is here and can give you fuller particulars from the tariffs 
which he has. But we have had a controlling effect on their rates. I 
can illustrate that by saying that during the period of 1895 we put on 
a steamship from Colon to New Orleans, and we compelled the trans¬ 
continental by that one act to reduce a long-established $15-per-ton 
rate on wine bv one-half, accompanied by an agreement not to restore 
the original rate in any case, in order to meet our competition. 

Mr. Mann. You control the rate from San Francisco to New York, 
by way of the Pacific Mail and your line, do you not? 

Mr. Drake. Yes, sir; and we get 50 per cent of the through rate. 

Mr. Mann. The Pacific Mail gets 50 per cent for carrying from 
San Francisco to Panama? 

Mr. Drake. Yes, sir. 

Mr. Mann. You get 50 per cent for carrying across the Isthmus and 
then to New Y ork ? 

Mr. Drake. Yes, sir. The Pacific Mail makes a haul of 3,500 miles 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


117 


and we make a haul of 48 miles across the Isthmus and of 2,000 miles 
to New York. They discharge their ship to us, and we handle the 
freight across the Isthmus and carry by steamship to New York. 

Mr. Mann. You say you are the controlling factor? 

Mr. Drake. No, sir; I say we have a controlling influence on trans¬ 
continental rates. 

Mr. Mann. That is the same as being a controlling factor. Sup¬ 
pose you should reduce your rate 50 per cent, could that be clone ? 

Mr. Drake. It could be done, with serious loss to us. 

Mr. Mann. Very well. Your road will be out of existence in a few 
years, so far as carrying freight is concerned. 

Mr. Drake. 1 beg to differ with you on that point. 

Mr. Mann. Well, of course you may differ. 

Mr. Drake. I think I can substantiate my opinion on that. 

Mr. Mann. But if the rate is reduced would it have the effect of 
reducing transcontinental rates? 

Mr. Drake. I should judge so. It would depend entirely on the 
quantity that was carried by our route. The tonnage we have now is 
small as compared with the tonnage carried by the transcontinental 
roads between the seaboards, but, nevertheless, any reduction in our 
rate would have an elfect. 

Mr. Mann. You stated your rate had a controlling effect. 

Mr. Drake. I mean they have to meet our competition, because our 
competition is susceptible of development. 

Mr. Mann. Then if the United States Government gets absolute 
control of the Panama Railroad and reduces the tariff from Panama 
to New York, that will have the effect of reducing the transcontinen¬ 
tal rate on all railroad lines? 

Mr. Drake. Yes; if the volume carried by our route was progress¬ 
ively larger. 

Mr. Mann. I am trying to get your judgment. 

Mr. Drake. I say to you frankly I think it would be ruinous to 
make the reduction you speak of., 

Mr. Mann. You mean to the revenue of the property? 

Mr. Drake. Yes, sir. 

Mr. Mann. Assume that. That is a policy for the Government to 
determine. 

Mr. Drake. I want to modify that. I think you may get a wrong 
impression from what I have said. With such a reduction of the 
through rate, it would be impossible to get a carrier on the other side 
to participate in the traffic, and we would have again to establish our 
own line on the Pacific side. It is a haul of 3,500 miles, and you 
should give the present management the credit of having reduced 
rates as far as we could do so and still get remuneration from it. Any 
further serious reduction would be made under a policy that assumed 
the whole responsibility for loss of revenue. 

Mr. Mann. You think that the Pacific Mail Company would refuse 
to carry freight from San Francisco to Panama, although they 
received the same, if the Government received less? My suggestion 
is that if we could reduce 50 per cent between Panama and New 

York- . 

Mr. Drake. And still give them what they receive now as an arbi¬ 
trary or fixed proportion of the through rate as reduced? 



118 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Mann. We may not be able to determine their rates. Would 
it have any effect on them if they fixed their own rate? 

Mr. Drake. That would not be a through-billing business. By 
that method the through rate would be the sum of the local rates. 
The thesis of through-billing business contemplates the issue of a 
through bill of lading by the initial carrier, 

Mr. Mann. You do not think it would make any difference at all if 
you reduced our portion of the rate 50 per cent from Panama to New 
York and left that portion of the rate from San Francisco to Panama 
as it is now? Would the Panama Railroad refuse to carry the 
freight ? 

Mr. Drake. T do not think so. 

Mr. Mann. 1 understand that is the contract that is to be changed. 

Mr. Drake. Independent of the contract, that is the principle of 
through business, and the business would have to be done on a 
through-billing basis. If a $6 rate be established, and our present $4 
share reduced to $2 per ton, the Pacific Mail would receive C>6| per 
cent and we would receive 33 A per cent. We would get $2 for our 
haul, and they would continue to receive $4. 

Mr. Mann. If that was the effect, would that have the effect of 
reducing the transcontinental rate $2 a ton ? 

Mr. Drake. On our railroad? 

Mr. Mann. No, no. 

Mr. Drake. Yes, sir; I assume it would. Our competition would 
then be of a character to effect a reduction in transcontinental rail¬ 
road rates, but our revenue would suffer. 

Mr. Mann. You spoke of the European lines. Why do you not 
maintain a European agency now if it was necessary before? What 
is the difference in conditions? 

Mr. Drake. We do not, because we have been able to remodel our 
business. Mr. Whaley resigned, and Ave did not consider it necessary 
to appoint anybody else of equal standing to his position, and in the 
meantime Ave had reached an agreement with the European lines, 
which I have described before, upon a modification of the bill of 
lading, a remodeling of the classification, and the establishment of a 
division of rates on the percentage basis. 

Mr. Mann. When was that done ? 

Mr. Drake. That end has been secured step by step within the last 
two years. We had been Avorking for it seA r en or eight years and 
finally accomplished it, and the railroad has working arrangements 
Avith eight European lines on the Atlantic side and an American and 
tAvo foreign lines on the Pacific side, and by A r irtue of the arrangement 
can in case of need name the line by which the shipments brought to 
our terminals and not speedily remoA T ed must go forward. We adAuse 
our connecting lines on each side of any additional connection on the 
other and assume responsibility for the newcomer until accepted. We 
give the initial carrier in all cases authority to make the rates doAvn to 
an agreed minimum, and thereafter lower rates can only be made in 
case the initial carrier is mutually authorized to make them, so that, 
while the arrangement is not automatic, it is fitted to meet all require¬ 
ments. The traffic manager is engaged half of his time in ansAvering 
inquiries and correspondence on those points. We have established 
the direction in the NeAv York general office, so that Ave have better 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 119 

control than we have ever had before, and there was not the occasion 
for renewing the European department after Mr. Whaley’s resigna¬ 
tion for that reason. Most of the cargo that is carried both wa}^s— 
all of that which goes to Europe being essentia 11 v products—is sent 
collect C. O. D. 1 

Mr. Mann. What proportion of the through rate from Hamburg 
to San Francisco do you get? 

Mr. Drake. Twenty-five per cent. We established a uniform pro¬ 
portion on business—on all business except from our own line. 

Mr. Mann. As a matter of fact, do you figure that you get 25 per 
cent of the through rate from San Francisco to New York- 

Mr. Drake. No, sir. We get 50 per cent. 

Mr. Mann. For the trip across the Isthmus, and then 25 per cent 
for the steamship transportation ? 

Mr. Drake. No, sir; that is not a fact, because we make a different 
distribution of that rate. Our line commences at New York vfith the 
steamship line and extends to Panama. There is a division of the 
through rate as between our cocarrier and ourselves of 50 per cent to 
each. There is a relative accounting between the steamship line and 
the railroad company. 

Mr. Mann. If the freight is carried by any other line than your 
own, would you get 25 per cent for the trip across the Isthmus ? 

Mr. Drake. Yes, sir. I want to make a distinction as to San Fran¬ 
cisco business. The railroad company does not receive 25 per cent on 
that business, which forms the majority of its tonnage. 

Mr. Mann. What per cent do you figure belongs to the railroad trip 
across the Isthmus on the business you get between San Francisco and 
New York, and what per cent belongs to the steamship service between 
Colon and New York? 

Mr. Drake. The earning is divided between our railroad and steam¬ 
ship line on the basis of 55 and 45 per cent of our 50 per cent of the 
through rate. Forty-five per cent of 50 per cent would be 22J per 
cent of the through rate for the railroad. 

Mr. Mann. If the rate across the Isthmus, where you now T get 25 
per cent of the through rate, was reduced, would that have any effect 
on the total of the through rate between San Francisco and foreign 
points ? 

Mr. Drake. Yes, sir. The through rate should be reduced propor¬ 
tionately. 

Mr. Mann. That is to say, you think the steamship company- 

Mr. Drake. I think they should, but would not change their rate. 
There would be a repetition of what has occurred before as the result 
of like attempts that have been made in the past. For instance, 
Mr. De Lesseps sought to make the railroad a mere transfer road and 
make uniform rates or tolls for passengers and cargo—that is, so much 
per capita and per ton—and the result was illustrative. He began 
with the Central American and Mexican business. 

Mr. Mann. Did he make a reduction of freight rates? 

Mr. Drake. Yes, sir; over the railroad. 

Mr. Mann. What effect did that have on the transcontinental lines? 

Mr. Drake. They were not in that particular business. I was 
speaking of foreign business. I was using that incident as an illus¬ 
tration, because I thought it answered your question. 




120 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Mann. There is more or less foreign business to San Francisco? 

Mr. Drake. To San Francisco, but not from it. 

Mr. Mann (continuing). And Hamburg? 

Mr. Drake. I would like to finish that story, sir, because it is perti¬ 
nent, and answers your question, in a way. You asked what effect it 
would have on the through rate, and I said that it should diminish it 
to the extent that we reduce. The carriers on both sides, however, 
absorbed our reduction and maintained the same through rate that 
was in effect before the railroad company made the reduction. 

Mr. Mann. That is the illustration you give, but you think it would 
not have that effect now ? 

Mr. Drake. No, sir. 

Mr. Mann. I understood you to say that it would reduce the 
through rate. 

Mr. Drake. The through rate should be reduced to the extent we 
made our reduction, but whether it would or not would depend on the 
connecting lines. 

Mr. Mann. What is your judgment about that, whether it would 
increase the returns of the road, or whether there would be a reduc¬ 
tion on the through rate ? 

Mr. Drake. I think it would ultimately effect a reduction of the 
through rate, because we should insist upon it, and would bring it 
about in the end. 

Mr. Mann. Is that the effect, more or less, of the transcontinental 
railroad ? 

Mr. Drake. 1 do not understand you. 

Mr. Mann. Is all that foreign business affected by the transconti¬ 
nental railroad ? 

Mr. Drake. Yes, sir; a great deal of it goes by United States and 
Canadian routes. 

Mr. Mann. Are not the steamships running from Hamburg to 
Philadelphia and New York and Baltimore in competition with the 
steamship lines that go to Colon, carrying through freight for San 
F rancisco ? 

Mr. Drake. Yes, sir. 

Mr. Ma nn. The steamship lines that run to New Orleans are also 
in competition with the steamers to Colon on through freight to San 
Francisco? 

Mr. Drake. Yes, sir. 

Mr. Mann. So that a reduction of the railroad rate in Panama is 
likely to affect the rate all the way through on all of these lines? 

Mr. Drake. It should. To reduce the railroad rate would not be 
remunerative to the railroad. It would jeopardize the railroad’s 
revenue. 

Air. Mann. That is very likely, but we are building a canal down 
there that will cost several hundred million dollars, and I think that 
nobody ever assumes that it will be remunerative. 

Air. Drake. Excuse me, but the railroad has certain obligations 
that it must meet. We pay $250,000 to the Republic of Panama, and 
we have 4J per cent mortgage bonds which require a redemption fund 
of $150,000 a year, and must pay interest on the outstanding bonds. 
All of that amounts to $-15,000 a month—over $500,000 a year—now, 
and will for twenty years. The payments will have to be made by 
the railroad, and the railroad has to earn the money, and if the rail- 





.INVESTIGATION OF PANAMA RAILWAY COMPANY. 121 

road is to be put in a position so that it can not, it must be because 
there is an owner who takes the responsibility. 

Mr. Mann. Does that company pay the $250,000? 

Mr. Drake. Yes, sir. There is a misunderstanding about that. 
The company’s annual indemnity to Colombia was capitalized in 1880 
for twenty-eight years and the railroad consequently pays every 
year by the redemption of these bonds, and in the extinction of that 
bond in 1008 the railroad will resume paying the $250,000 in cash, 
and will continue to pay it until the expiration of our concession, 
which is in 1969. So that when you contemplate the reduction of 
the earning power of the property, I ask you to consider what the 
effect would be. It. would be the destruction of what is to-day a well- 
established, largely remunerative business, and has always been so. 
The railroad has $38,000,000 in net earnings since it was organized. 

Mr. Mann. Do you think it would be wholly improper for the 
Government, which proposes to construct a canal, and then make a 
charge that will be nominal in comparison with the interest and the 
expense, to consider that it may also reduce a freight rate without 
regard to profit? 

Mr. Drake. I do not want to comment on the propriet}^ of the 
policy, but I think, judging from my standpoint, a commercial 
one, it would be a mistaken policy, in view of the responsibilities 
attaching to the operation of the railroad; and as to one thought on 
this, I am one who believes that the railroad will continue to operate, 
as it always has, for the reason that all of the lines which come to 
Colon or Panama are circulatory lines. Their vessels start from 
their home ports and stop at ports on the way along until when 
they reach Colon or Panama they have a comparatively small quan¬ 
tity of cargo for transportation over the railroad, and there are eight 
such foreign lines, at least, in connection Avith us at Colon and 
three on the Pacific side in the business. Those lines are going- 
right on with their circulatory business the same as the railroads 
running in the interior of the country. When the canal is com¬ 
pleted it is not going to change that business, which will go on just 
the same as the service of the Panama Railroad will be going on, and 
that service is going to be resorted to the same as all railroads are 
resorted to for the quick transfer of small lots of cargo that Avould 
otherwise be combined and constitute a load for a through ship 
that might be long delayed to complete its load before passing 
through the canal. 

The railroad will supply that need and will, I expect, do business 
of much larger aggregate than is generally anticipated. I believe 
that the plans of the canal contemplate providing for the transpor¬ 
tation of freight over the railroad at a very much reduced cost of 
operation, because of increased equipment and enlarged terminals, 
and that of itself Avill attract business, as increased facilities always 
attract business; hence I believe that the railroad will continue to be 
an important factor in transportation across the Isthmus. You 
may arrive by steamship one morning at one terminus of the canal, 
and your steamer will be going through the canal; it will take it 
twelve hours to get through, and you will not Avant to stay on the 
steamer all that time, and you will use the railroad, and with your 
baggage run across and meet the steamer on the other side Avhen it gets 


122 


INVESTIGATION OF PANAMA RAILWAY COMPANYc 


through. That is going to constitute a business that no one can 
estimate. 

Mr. Lovering. To return to the meetings of the board of directors 
and the executive committee, can you tell the committee what the 
character of the work is that that executive committee is called upon 
to do; what questions are they called upon to consider, to give their 
judgment and experience upon? 

Mr. Drake. Everything relating to the operations of the com¬ 
pany. I, as executive officer, carry out all measures adopted by 
the executive committee. There is no official act of mine of any 
i mpor tance- 

Mr. Lovering. Do they take up the matter of business connected 
with foreign lines, and such matters as the rate on coffee, and- 

Mr. Drake. No, sir; that is left to the traffic department. 

Mr. Lovering. That is not brought to their notice? 

Mr. Drake. No, sir. 

Mr. Lovering. What questions are brought to their notice? 

Mr. Drake. All questions of policy; all questions of action; the exe¬ 
cution of contracts. I might answer your question of a moment ago 
by saying that no contract is made with these connecting lines, or no 
agreement that is not submitted to the executive committee, and their 
decision transmitted to the executive officer. The minutes of the 
meetings of the executive committee are very full, and show that every 
such question as the operation of the railroad and increase of its 
facilities and the making of contracts with connecting lines, and the 
purchase of material, and in fact every question governing the policj r 
of the railroad company is considered by the executive committee. 

Mr. Lovering. And it is that that makes it important to have a 
high class of men as directors and members of the executive com¬ 
mittee ? 

Mr. Drake. Yes, sir: I think there is no board that can be pointed 
to that has members of higher standing, individually or collectively. 
It has been my privilege to sit for years with such gentlemen as Gen¬ 
eral Newton, Avho was the president of the board before J. Edward 
Simmons, who holds many other similar positions; Mr. Gallaway, 
who is president of the Merchants’ National Bank; Vernon H. Brown, 
who is the New York representative of the Cunard Line; Mr. Crom¬ 
well; Mr. Hopkins, who was the president of the New York and Sus¬ 
quehanna Railroad Company; Mr. Whaley; Mr. Felton; Gen. W. B. 
Franklin, who was, as you all know, Chief of the Engineer Corps, 
and Gen. C. B. Comstock, who succeeded him because of his similar 
relation. Men of that class have always filled the places of directors 
in the company. I have forgotten to mention Mr. J. IT. Parker, 
ex-president of the New York Cotton Exchange, and Mr. Einsiedler, 
managing representative of the Credit Lyonnais in this country. 

Mr. Lovering. Do von think that the business could have been car¬ 
ried on as well or as profitably without the assistance of a board com¬ 
posed of this class of men ? 

Mr. Drake. No, sir; I think it is essentially necessary—it has been 
for the past operations, and will be for the future, that there should 
be a board of that character. 

Mr. Townsend. Mr. Simmons has not devoted much of his time 
to it? 



INVESTIGATION OF PANAMA RAILWAY COMPANY. 


123 


Mr. Drake. On the contrary, he is a very regular attendant at 
meetings, and I think that no one has attended to the business of the 
company more regularly and attentively. He is always in touch with 
the company. 

Mr. Waxger. We understand the Pacific Mail Steamship Company 
to be a competitor of the transcontinental railroad lines, or is it con¬ 
trolled or dominated by them ? 

Mr. Drake. A majority of the stock is owned by one of those lines. 

Mr. W anger. Which one is that ? 

Mr. Drake. The Southern Pacific Railroad Company. The 
Pacific Mail Steamship Company is a company incorporated in Xew 
York jState that has been in active operation for fifty years and has 
to-day an establishment all along the Pacific coast between Panama 
and San Francisco. It has its agencies and fleet of steamers engaged 
in that business, but I believe it was acquired chiefly because of its 
steamship service across the Pacific. The Southern Pacific Railroad 
acquired control of that line; nevertheless a contract was made with 
us because only an American line is allowed under the coastwise law 
to carry business between United States coast points and because 
without coastwise cargo their line would be operated at a loss. With 
earnings from their port to port business and our coastwise traffic 
they can operate at a cost that will enable them to accept the agreed 
proportion they are allowed out of our through rate. 

Mr. Waxger. Do you know how the rates charged by the Pacific 
Mail Company for the transportation of freight from San Francisco 
to Panama compare with the rates charged bv them to South Ameri¬ 
can ports? 

Mr. Drake. I can not say. 

Mr. Waxger. Are not the rates considerably higher to Panama 
than to points in South America ? 

Mr. Drake. Our rates? 

Mr. Waxger. No, sir: the rates of the Pacific Mail Steamship 
Company ? 

Mr. Drake. I do not know. We have no statistics on that. We 
have not their tariffs except on the through business. 

Mr. Waxger. You have no knowledge of it ? 

Mr. Drake. We are not concerned in their local business. 

Mr. Waxger. You have no knowledge of what their local tariffs 
are ? 

Mr. Drake. I can obtain the tariff, if you wish it. 

Mr. Waxger. Do you know whether or not it is cheaper for a 
merchant in Panama to obtain his goods on the Pacific coast of South 
America and then ship them from there to Panama than it is to have 
them shipped direct from San Francisco to Panama? 

Mr. Drake. That varies on special commodities. There are a great 
many eccentricities of traffic. We find, for instance, that flour is 
moving from Guayaquil to San Francisco and from San Francisco to 
Guayaquil at the same time; and we find the same thing on sugar. 
When producers are seeking markets sea rates are made competitive, 
and sea rates vary as a natural result of such competition. 

Mr. Waxger. Is there any competition with respect to the port of 

Panama ? . _ 

Air. Dr\ke. There are no steamers that run to Panama now except 
those that connect with our line. The two steamship lines that 


124 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


connect with the south are the Pacific Steam Navigation Company 
and the Chilean Company, so-called: and one from the north, the 
Pacific Mail Steamship Company. There are no other regular lines 
there. 

Mr. Wanger. Do you know whether or not there are any traffic 
agreements between the Pacific Mail Steamship Company and the 
lines themselves ? 

Mr. Drake. Yes, sir; there are. We ourselves were the means of 
bringing about an interchange of traffic at that port, but the condi¬ 
tions of that interchange we do not know. I must speak by hearsay, 
but I believe that the returns to each party out of the through rate are 
established on a mileage basis. 

Mr. Lovering. In your opinion, would it be advisable for the 
United States, after it takes possession of everything—the railroad 
and everything else, and the management of the railroad, and so 
forth—do you think it would be good business to retain an official con¬ 
nection in the city of New’ York ? 

Mr. Drake. I think it is absolutely necessary. I make that state¬ 
ment without any bias, because I am operating an office for the prop¬ 
erty. I think it is absolutely necessary, because the business, as I 
explained earlier, is managed entirely from here now. All of the 
returns of the company’s business are received here, and all of the rates 
are established from here, and all of the machinery of the company is 
here, and 1 think it would be a great mistake to revert to the old con¬ 
ditions which obtained when Colon was the terminal of the railroad 
company, because New York is a commercial center. The business 
of the line to-daj 7 requires a large clerical force of a character that 
could not be retained permanently on the Isthmus as it is retained 
here, because of the necessity for giving long periodical vacations, 
whereas here we have men who have grown up in the business who 
are constantly engaged in checking the accounts and are fully in¬ 
formed of conditions relating to traffic with our cocarriers. 

Mr. Lovering. Does not the New York management govern and 
indicate what freight will be available at Colon—at Panama ? Is it 
not all known in New York? 

Mr. Drake. The whole business is done in New York. 

Mr. Lovering. And a ship arriving there knows before it arrives 
even, or knows when it does arrive, that it will have a cargo? 

Mr. Drake. Yes, sir; we are advised of the arrival and departure 
of the ships and the amount of cargo they have or may expect. That 
does not apply to the European markets. 

Mr. Lovering. You have a great deal of demurrage? 

Mr. Drake. The ships move regularly. 1 may sav that there were, 
within one week in December, 20 large steamers handled in the port 
of Colon, where we have only three wharves at present, without any 
demurrage or any interruption of regularity. There was some little 
interruption, but we were able, by our organization down there, to 
handle it; but without the officers in New York it would be more 
difficult to manage it, because friction and delays can be more speedily 
repaired between principals. 

Mr. Lovering. Tt would be more difficult without the officers in New 
York? 

Mr. Drake. The whole business is directed from New York. Under 
our concession avc are compelled to retain a representative down there, 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 125 

but the operations are all directed from here. We have a general 
manager who is in close touch with the railroad all the time, and the 
superintendent reports to us by every mail everything that needs 
consideration here, or that he needs authority for there. Anything 
that is important and requires the action of the executive committee 
is submitted to it. Every outgoing mail is bulky with letters con¬ 
taining instructions to him for handling all kinds of business that 
may arise. It would be destructive of traffic and revenue to so arrange 
that the management of the business of the railroad company be trans¬ 
ferred to the Isthmus. 

Mr. Esch. \ ou state that reducing the railroad rate would have 
the effect of diminishing the through rate, and that would be detri¬ 
mental to the through road. Would not the reduction of the through 
rate stimulate rather than discourage business? 

Mr. Drake. Yes, sir; it should, undoubtedly. 

Mr. Esch. Would not, then, the railroad receive an increased rev¬ 
enue by reason of the increased business? 

Mr. Drake. That would depend upon what was done with that 
reduction. If the present carriers on both sides remained, and other 
companies operating on both sides arranged for an interchange of 
traffic on the basis of the railroad’s reduced rate, it might be that 
would throw open the business to severe sea competition, which might 
result in the survival of the fittest, and so produce the conditions that 
gave us the Pacific Mail connection in 1878. 

Mr. Lovering, v I)o you ship much freight that originates at inte¬ 
rior points of this country on the Atlantic? 

Mr. Drake. Yes, sir; our rates are made so that in exceptional 
cases they extend back even to Chicago. 

Mr. Lovering. Has that freight originating in Chicago been shipped 
to New York, and by your steamers to Colon? 

Mr. Drake. Yes, sir; it has. It oftener comes from around Pitts¬ 
burg. The other day when a large shipment of sewer pipe went from 
Marion, Ohio, to New Orleans, going down that way, we felt that 
our territory had been invaded. 

Mr. Lovering. Do you make a special rate in such cases? 

Mr. Drake. No, sir; we make a through rate which absorbs the 
cost of bringing it to New York. 

Mr. Lovering. Does that obtain also on the Pacific slope? 

Mr. Drake. No, sir; except in theory. 

Mr. Lovering. And notwithstanding that fact you can meet the 
competition of the transcontinental lines ? 

Mr. Drake. Yes, sir. 

Mr. Mann. That is because of the fact that the transcontinental 
rate is the same from New York as it is from Omaha to San Fran¬ 
cisco. 

The Chairman. The postage-stamp rate? 

Mr. Mann. No, sir; the freight rate. The freight rate is the same 
from all points east as it is from Omaha, 

The Chairman. Just excuse me one moment. I want to ask one 
more question. You named a large number of persons who had been 
connected with the directory of the Panama Kailroad. Were those 
gentlemen large stockholders? 

Mr. Drake. No, sir; they were qualified stockholders. 

The Chairman. Qualified by taking a share? 


126 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

Mi*. Drake. By buying a share. They were owners of their stock. 

The Chairman. Was it presented to them? 

Mr. Drake. No, sir. 

The Chairman. Or did they buy it in the market ? 

Mr. Drake. The}^ bought it, sir. 

STATEMENT OF WILLIAM NELSON CROMWELL, 

General counsel and director of Panama Railroad Company. 

Mr. Townsend. You have been connected with the Panama Rail¬ 
road how long? 

Mr. Cromwell. About fifteen years, sir. 

Mr. Townsend. And during all that time you have been attorney 
for the road? 

Mr. Cromwell. Yes, sir; my firm, Sullivan & Cromwell, are the 
general counsel. 

Mr. Townsend. And also a director, have you ? 

Mr. Cromwell. Nearly all this period I have been a director. 

Mr. Townsend. You were also active in negotiating the transfer 
of the stock of the Panama Railroad Company to the United States? 

Mr. Cromwell. Yes, sir; I was general counsel for the New Pan¬ 
ama Canal Company, and as such completed the transfer to the 
United States of the property of the canal company, including 68,886 
shares of the stock of this railroad company. 

Mr. Townsend. And you are now engaged in getting hold of the 
outstanding shares for the United States? 

Mr. Cromwell. Yes, sir; in accordance with the information which 
I gave you at our last hearing the President and the Secretary of War 
charged me with the task of acquiring the balance of the stock at par, 
and I have made a proposal to stockholders to that effect. 

Mr. Townsend. In the list of stockholders which you furnished us 
in New York the other day, and which I believe you stated is a cor¬ 
rect statement of the holders of the stock so far as your books are 
concerned ? 

Mr. Cromwell. Yes, sir; absolutely; and I think it is substantially 
correct, in fact, according to the experiences I have had in dealing 
with the parties. 

Mr. Townsend (continuing). You have a good many of these 
shares that you have purchased since, that have not'been transferred 
to the United States ? 

Mr. Cromwell. Yes, sir; certain of them I have already acquired 
for the Government. 

Mr. Townsend. I noticed by this list that you personally hold 30 
shares ? 

Mr. Cromavell. Yes, sir. 

Mr. Townsend. Have they been transferred to the Government ? 

Mr. Cromavell. Yes, sir; I was the first to turn in my few shares as 
soon as the Government was ready to take them. I transferred 29 of 
them to the Government, retaining one share to qualify me as a 
director. I had acquired 30 shares principally as a matter of conven¬ 
ience in the administration of the company, to qualify directors. As 
general counsel I had decided that it was necessary that each director 
should actually own at least one share. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 127 

Mr. Townsend. When did you buy these 30 shares? 

, Alr ' S^omweu.. Perhaps four or five years ago. The books will 
.now. they are of trifling amount, you see, and were of no conse¬ 
quence to use otherwise. 

Mr. Townsend. Do I understand you that you purchased these 
n the P ur P° se of transferring them to the directors? 

1 . Okomwell. \ es, sir; as a convenient means of qualification, 
as required from time to time, but the directors always paid for their 
single qualification share. It is unprofitable, but a mere trifle. 

Mr. Iownsend. Unprofitable? 

Mr. Cromwell. Certainly. 

Mr. Townsend. Is not the stock profitable? 

.Cromwell. It has not proven so to the owners, in the payment 
of dividends or otherwise. 

Mr. Townsend. But as the owner of the stock you are the owner of 
the surplus ? 

Mr. Cromwell. The surplus has not been distributed. It is, in 
fact, valuable, but it has not proven a good investment. 

Mr. Townsend, I do not believe I understand you. 

Mr. Cromwell. It has an inherent value. 

Mr. Townsend. You mean the stock that you have thus trans¬ 
ferred has not been profitable to you ? You mean that it has not been 
profitable to you ? 

Mr. Cromwell. Certainly. The few shares I speak of have given 
no profit to me, nor were they acquired for that purpose. I attach no 
importance to such a small affair, from a business standpoint. 

Mr. Townsend. You do not maintain that the stock of the company 
is not valuable? 

Mr. Cromwell. On the contrary, I think it is valuable. 

Mr. Townsend. Now, you had something to do before now about 
the contract that was entered into with the Pacific Mail Company? 

Mr. Cromwell. Yes, sir. 

Mr. Townsend. When was it that that company—the Pacific Mail 
Company—was transferred from the Southern Pacific to the Northern 
Pacific ? 

Mr. Cromwell. Permit me to correct your question. It was not 
the Northern Pacific that owned the majority of Pacific Mail stock; 
it was the Southern Pacific. 

Mr. Townsend. Is it the reverse of that? 

Mr. Cromwell. The transfer was from the C. P. Huntington estate 
to the Southern Pacific. I simply wanted your question to be so 
that I could correctly answer it. The Northern Pacific is not the 
railroad in mind. 

Mr. Townsend. Did we not have testimony that it was concerned ? 

The Chairman. A gentleman said yesterday that it was transferred 
to the Northern Pacific and then back to the Southern Pacific. 

Mr. Cromwell. That would be inaccurate, sir. 

Mr. Townsend. Tell us what the history of that is. We have it 
all down here in this testimony, and I am sure that the Northern 
Pacific is mentioned. 

Mr. Cromwell. It is a matter of current railroad history, and I do 
not suppose that my information is any better than that of other gentle¬ 
men. But we know, as a matter of current railroad knowledge, that 
the majority of the capital stock of the Pacific Mail Steamship Com- 


128 INVESTIGATION OF PANAMA KAILWAY COMPANY. 

pany was acquired some years ago by Mr. C. P. Huntington. After 
his death it was acquired by the Southern Pacific. Subsequently, 
by the absorption of the Southern Pacific into the Union Pacific 
system, it came into the control of the latter system, by which it is 
now held. We have no relations with any of these railroads that I 
speak of. I mention it simply as a matter of information. 

Mr. Townsend. 1 understand that the Panama Railroad Company 
has no connection, directly or indirectly, with any of these railroads? 

Mr. Cromwell. None whatever. We do not know them in the 
transaction of any of our business. 

Mr. Townsend.* Can you tell me how many dividends the Panama 
Railroad Company has declared since the Commissioners, the mem¬ 
bers of the Isthmian Canal Commission, became directors in the 
railroad company ? 

Mr. Cromwell. One dividend, sir. 

Mr. Townsend. When was that? 

Mr. Cromwell. In January last, the dividend which has just been 
paid, February 1, 1905. 

Mr. Townsend. And that was 5 per cent? 

Mr. Cromwell. Five per cent; yes, sir. 

Mr. Esch. In that connection, what was the share that the Govern¬ 
ment received on that dividend? 

Mr. Cromwell. In dollars and cents? 

Mr. Esch. Yes; if you can give it approximately. 

Mr. Cromwell. Yes, sir; I can. [Making calculation.] 

Mr. Mann. That would leave out 1,034 shares. 

Mr. Cromwell. Yes, sir. The Government now owns 68,988 
shares, qf record, I think- I sold to the Government of the United 
States 68,887 shares. Since that time, by the direction of the Sec¬ 
retary of War, the Isthmian Canal Commission purchased 101 shares 
at par, making the present holdings of the United States Govern¬ 
ment 68,988 shares. 

Mr. Richardson. What is the number of the outstanding shares? 

Mr. Cromwell. Leaving outstanding in the hands of the public 
1,012 shares. The United States has received in cash $344,940, the 
dividend paid on the 1st of February of this year. 

Mr. Townsend. To whom was that paid? 

Mr. Cromwell. All of this sum was paid by check to the Secre¬ 
tary of War, with the exception of the dividends on 94 shares 
which stood in the name of Admiral Walker, chairman of the Isth¬ 
mian Canal Commission, which was paid to him as the chairman of 
the Commission, and the dividend on the remaining 7 shares, owned 
by the Government, and paid directly to the seven members of the 
Commission, in whose respective names the shares stood. 

Mr. Townsend. You included in these shares the shares held in 
New York by the members of the Commission? 

Mr. Cromwell. Yes, sir; because they were qualified as directors 
out of the 101 shares which the United States purchased. Of the 
101 shares purchased, 94 remained in the name of Admiral Walker, 
the chairman of the Commission, and the other 7 were divided among 
the members of the Commission. 

Mr. Richardson. What is the estimate of the value of the 
shares held by the public as compared with those held by the 
Government ? 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 129 

Mr. Cromwell. There is no market value except $100 a share. 

Mr. Townsend. Admiral Walker holds 95 shares? 

Mr. Cromwell. At first I qualified him and each member of the 
Commission out of my 30 shares. Afterwards this was returned to 
me. Of the 101 shares purchased by the Government there were 95 
placed in the name of the chairman. One share was transferred to 
Admiral Walker to qualify him as director, leaving in his hands 94 
shares as chairman of the Commission. The one share which stands 
in his name individually is also owned by the Government, as are 
those which stand in the names of the other members of the Commis¬ 
sion. 

Mr. Townsend. Then he holds 95 shares with that one? 

Mr. Cromwell. Ninety-four in his capacity as chairman of the 
Commission, and one in his individual name, but all belonging to the 
Government, 

Mr. Townsend. Do you not think that the stock that the Govern¬ 
ment does not now own is likely to increase in value very rapidly by 
reason of this fact? 

Mr. Cromwell. I can not say. Have I made that clear, Mr. Town¬ 
send? 

Mr. Townsend. Yes, sir; I think so. Now, do you remember what 
was stated at the time Mr. Drake testified about (in New York) in 
regard to the payment of per diem fees to the members of the board 
of directors and to persons as members of the executive committee? 

Mr. Cromwell. I do not know anything about that. 

Mr. Townsend. You do not know that? 

Mr. Cromwell. No, sir. 

Mr. Townsend. You were not concerned in the matter? 

Mr. Cromwell. No, sir; it was none of my concern. 

Mr. Townsend. Now, you were employed as attorney for the Pan¬ 
ama Canal Company? 

Mr. Cromwell. Yes, sir. 

Mr. Townsend. And also as attorney for the Panama Railroad? 

Mr. Cromwell. Yes, sir. 

Mr. Townsend. And you have also occupied the position as agent 
for the Republic of Panama in the investment of the $10,000,000 
obtained by them? 

Mr. Cromwell. I have. I was counsel to the special fiscal com¬ 
missioners and I am now, in succession, the special fiscal commissioner 
of the Republic of Panama. Under my advice the Republic invested 
its moneys in the United States. 

Mr. Townsend. How much of that did they invest? 

Mr. Cromwell. $6,000,000; and they have also nearly $3,000,000 
more on deposit at interest in New York. 

Mr. Townsend. And how much of that $6,000,000 is invested in 
bonds of the Panama Railroad Company ? 

Mr. Cromwell. About $1,000,000 of the 4J first-mortgage bonds 
were purchased in the open market at a premium. I regarded them 
as bonds of the highest character, and I recommended them to the 
Commission as being bonds worthy of their fullest confidence. I 
regard this corporation as one of the best in the United States, and 
they manifested their confidence in this Government by making the 
investment. 

Mr. Townsend. What was the actual price paid for those bonds? 

PAN RY— 05-9 


130 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Cromwell. Ordinarily I would ask to be excused from answer¬ 
ing that question, as it involves my relations to the Republic; but as 
1 have, with the approval of the Republic, informed the United States 
Government of the transaction, I feel at liberty to state to you that 
the Government of Panama paid 105 per cent. They were purchased 
in the open market the same as Government bonds or anything else 
are purchased. The purchase was no concern of the Panama Rail¬ 
road Company as a corporation, of course. The bonds were not pur¬ 
chased from the company, but through bankers in the open market, 
as an investment. 

The balance of the money of the Republic is invested in first mort¬ 
gages upon improved real estate in New York, at the rate of 4f to 4J 
per cent; investments of the highest character, and in respect of all 
which we feel some pride. 

Mr. Lovering. I would like to ask you if you consider it a good ' 
business proposition for the Government, or anybody connected with 
this railroad and this property, to continue operating it as a com¬ 
plete through transportation line? 

Mr. Townsend. Prom New York to San Francisco? 

Mr. Lovering. From New York to San Francisco, complete. I 
am asking for your judgment on it as a business question. 

Mr. Cromwell. I understand that you mean as to earnings, being 
controlled solely by business considerations and not by any question 
of public policy. With that understanding, I answer, yes. As I 
have said at a previous hearing the Panama Railroad has been in 
operation for over fifty years. It has not ceased operations one hour 
during that long period. It has never defaulted in payment during 
that half century. It has never ceased throughout that whole period 
to make money, save in two or three years when the board experi¬ 
mented with some new business policy, as Mr. Drake and others have 
testified. I refer especially to the periods when they terminated 
the contracts with the Pacific Mail, on one occasion inaugurating the 
“ open-door ” policy and on another occasion making alliance with 
the San Francisco merchants. On those occasions we suffered loss. 
But it is a very interesting fact to note the earnings made during 
this half century. It may be of interest to you, for I assume that 
you desire to know all about your property. You want to make up 
your minds as to whether you had better disintegrate and abandon 
this splendid business which it has taken half a century to build up, 
or whether you want to operate it and make earnings which will 
diminish to that extent the cost of the canal. It is for us, of the 
Panama Railroad Company, to give you all the light we can. None 
of us have any pecuniary interest in what you do about it. The New 
York gentlemen who are directors are serving as a matter of favor, 
and they are perfectly indifferent, from a pecuniary point of view, 
as to what the United States does with this property after it becomes 
sole owner. As a matter of fact, it has been a great boon to the 
stockholders to get them to serve and to secure their great experi¬ 
ence and active interest. They are gentlemen of distinction in their 
several occupations. We had two bank presidents, two railroad 
presidents, two bankers, one cotton merchant of great experience, 
two retired generals of the Civil Engineer Corps of the United 
States, one civil engineer and railroad manager of international rep¬ 
utation, besides Mr. Drake. I assume that you want to know some- 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


131 


thing about your property. Therefore I present you a statement, 
pieparecl by the treasurer, showing that from 1852 to November 30, 
1904, the Panama Railroad Company earned $38,859,254. 


Exhibit 8. 

\c1 comings. 1852 to Xovembcr 30. 1003. 

1852 _ __ _ ' 

1853 _ 

1854 _ 

1855 _ __ __ “I 

1856 _ 

1857 _" 

1858 _ 

1859 _'_ 

1860 _ 

1861 _ 

1862_ _ _' 

1863 _ 

1864 _ 

1865 _ 

1866 _ 

1867_^_ 

.1868_ 

1869 ___ 

1870 _ 

1871 _ 

1872 _ 

1873 _ 

1874__^_ 

1875 _ 

1876 _ 

1877 _ 

1878 _ 

1879 _ 

1880 _ 

1881_ 

1882_1- 

1883 _•_ 

1884 _ 

1885 _ 

1886 _ 

1887 _ 

1888 _ 

1889 _ 

1890 _ 

1891-_ 

1892 _ 

1893 _ 

1894 _ 

1895 _ 

1896 _ 

1897 _ 

1898 _ 

1899 ___r— 

1900 _ 

1901 _ 

1902 _ 

1903 _ 

1904 (11 months)- 

Total_ 

Less losses- 


$171. 759. 33 
202, 334. 65 

181. 212. 29 
591. 278. 55 
847. 629. 72 
591.481. 49 
735. 653. 72 
579, 206. 65 
765. 628. 23 
841.287. 04 

1. 309. 527. 79 
1,159, 898. 39 
1, 815. 013. 65 
1, 258, 744. 59 
3, 054, 441. 79 

1, 838, 301. 84 

2, 465, 697. 52 
972, 521. 78 
343, 315. 49 
244, 680. 29 
700, 584. 48 
579, 774. 39 
562, 001. 91 
730, 714. 21 
695, 147. 04 

1, 071, 683. 37 
1,079,626.06 
1, 120, 957. 40 
1, 102, 258. 39 
1, 306, 406. 03 
1. 082, 535. 29 
1, 151, 791. 67 
1. 175, 823. 67 
71, 609. 56 
118, 581. 20 
619, 831. 37 
1, 150, 544. 45 
384. 149. 69 
348, 873. 82 
323.800. 83 

182. 816. 90 
a 133, 699. 61 

fl 80, 776. 02 
62, 943. 85 
545,684. 53 
409, 873. 37 
266, 746. 73 
295, 231. 77 
446, 764. 68 
259, 590. 12 
295, 384. 49 
401, 068. 30 
561, 315. 95 


39, 073, 729. 93 
214, 475. 63 


Net earnings, 1852-1904 


a Deficit. 


38, 859, 254. 39 






























































132 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Throughout that entire period there were, you see, but two years in 
which a deficit occurred. Those were the years 1893 and 1894, when 
the company was trying one of these experiments. This $38,000,000 
is the colossal return of this property, managed as a combined rail¬ 
road and steamship business. 

The Chairman (Mr. Hepburn). How much has it diminished its 
debt during that time? 

Mr. Cromwell. During that period, sir ? 

The Chairman. Compare the debt of 1852 with the debt of to-day. 

Mr. Cromwell. Mr. Chairman, there was no mortgage on the prop¬ 
erty in 1852. It was built with the proceeds of the stock, etc. The 
company has never issued but two mortgages in all its history. 

The Chairman. When were they issued ? 

Mr. Cromwell. The T per cent sterling mortgage was issued in 
1867, and it matured in 1897. It was for $4,000,000. In 1897 it was 
replaced by the present 4-J per cent first mortgage issue. By apply¬ 
ing earnings to that purpose we have gradually reduced that issue so 
that to-day there are outstanding but $3,159,000 bonds, of which the 
company itself owns in its own treasury, as treasury assets, $647,000, 
leaving only $2,372,000 in the hands of the public. Thus the original 
mortgage debt of $4,000,000 has been reduced to a net outstanding 
indebtedness of $2,372,000. 

The Chairman. When you say “ this mortgage,” you mean the last 
one? 

Mr. Cromwell. Yes, sir; the present 44 first mortgage. 

The Chairman. The older one was canceled ? 

Mr. Cromwell. Yes, sir; it was canceled in 1897 and replaced by 
the present one 1 have referred to. I made the sale of $2,000,000 of 
these bonds myself to Messrs. Vermilve & Co., bankers, of Yew York, 
as a member of the executive committee. I sold them at a good price, 
and from the proceeds of the sale of these 44 per cent bonds, plus 
$705,000 cash out of the treasury, we paid off the balance due on the 
sterling mortgage. 

The Panama Railroad Company is never a borrower. Such a 
thing as issuing a note or bills payable, or anything of that character, 
is unknown to us. We are always a depositor of money at interest. 
For years and years, surely as long as I have been connected with the 
company, it has been a depositor at interest of moneys in the trust 
companies of Yew York, and it is so at this moment. We seldom 
have a balance of less than $500,000 to $1,000,000 in cash. Our bal¬ 
ance now is over $500,000 at this moment, after paying $350,000 in 
dividends on the first of this month. We discount "for cash our ac¬ 
counts current for supplies as. fast as we can, availing ourselves of 
every means of discount and economy in that Avay. 

Mr. Wanger. How much of those net earnings were earned before 
the railroad company went into the steamship business on the Atlan¬ 
tic side ? 

Mr. Cromwell. From 1852 to 1878 the railroad company had 
several different steamship connections on the Atlantic. From 1878 
to 1893 it had a traffic contract with the Pacific Mail, which operated 
a regular line between Yew York and Colon. 

In 1893 the railroad company established its own steamship line on 
the Atlantic, displacing the Pacific Mail on the Atlantic, and has 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


133 


ever since maintained the supremacy. This is the line we now 
operate. 

From Exhibit S it will be seen that the earnings from 1852 to 1878 
were $24,309,519.84; from 1878 to 1893, $11,219,606.39, and from 1893 
to 1904, $3,330,128.07. The Panama Railroad is a New York corpo¬ 
ration, and its charter provides that it not only may conduct a rail¬ 
road business, but also a steamship business, and it is pursuant to that 
power that those joint operations are carried on. 

The Panama Steamship Line is not a separate corporation, but is 
merely one branch of the corporate business, which is divided into 
two departments, the railroad and the steamship. 

Mr. Adamson. It is merely a property of the railroad company? 

Mr. Cromwell. That is right. One branch is reciprocal to the 
other: and for that reason I think it is inadvisable to separate the 
Atlantic Steamship Line from the railroad. The railroad is fed by 
the Atlantic Steamship Line. 

Mr. Mann. Just one question there, not connected with this at all. 

Mr. Cromwell. Yes, sir. 

Mr. Mann. As counsel for the railroad company, have you had any 
occasion to form any opinion, or have you otherwise come to any 
judgment, as to our right—the right of the Government—to con¬ 
demn the shares of the company held by private owners? 

Mr. Cromwell. Yes, sir. I have studied that question. 

Mr. Mann. What is your opinion? 

Mr. Cromwell. My opinion is that the bill which has been recom¬ 
mended by this committee and which has passed the House (known 
as the Mann bill) is constitutional, and that the condemnation pro¬ 
ceedings therein provided for are legally enforceable. 

Mr. Rict-iardson. Did you ever know of an instance in the history 
of the country where it was done ? 

Mr. Cromwell. There is no condemnation statute of this kind in 
any State of the Union. It is unique, but there are decisions of the 
courts sustaining the principle of the bill. 

Mr. Richardson. Under the right of eminent domain ? 

Mr. Cromwell. No, sir. I am sure that I could not tell you gentle¬ 
men, who are so able and experienced and have traveled over this 
ground so thoroughly, anything additional to the result of your 
studies. Mr. Townsend asked me a question upon that subject at the 
last session, and I gave him an opinion, off-hand, and this will be 
found in the minutes. 

Mr. Adamson. I have heard of such things. There is a case in 
Massachusetts and one in Connecticut, I believe, but I have not read 
them. Have you seen them? 

Air. Cromwell. AYs, sir. They sustain this principle upon which 
the pending bill is framed. 

Mr. Adamson. Did they condemn the minority stock, or the entire 
property ? 

Air. Cromwell. The minority stock. 

Air. Shackleford. I will say that this testimony, which has been 
given at these hearings and is typewritten, is here and can be read by 
everyone who wants it; and there is in it a very thorough review of 
this by Mr. Cromwell, and I may say a very satisfactory review. 

Air. Richardson. You have never known an instance in the history 


134 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

of the country where the right of eminent domain was exercised by 
the condemnation of personal property ? 

Mr. Cromwell. No statute exists; but the right of appropriation 
of real or personal property for public use is an attribute of sover- 
eignty and can be exercised through a statute. 

Mr. Richardson. Yes, sir. 

Air. Cromwell. I have no doubt whatever of the constitution 7 
power of Congress to enact such a law. The right of eminent domain 
undoubtedly resides in the United States, and the power which may 
define the exercise of it is the Congress of the United States. Thero, 
must exist a public need and the subject-matter must be, of course, 
within the jurisdiction of the United States. 

As an illustration, we could not condemn the railroad itself of the 
Panama Railroad Company under the right of eminent domain, 
because that is upon the Isthmus in a foreign territory, and Con¬ 
gress has not jurisdiction of the land—the road, the corpus. But the 
stock of the Panama Railroad Company is in contemplation of law 
in the State of New York. As you know so well, the capital stock of 
a corporation is in contemplation of law at the charter home of the 
corporation. The certificates for the shares of stock which the ordi¬ 
nary layman considers to be the stock itself, we all know is not the 
stock, the certificate being simply the evidence of ownership in the 
stock. The stock itself lies in the company, and in this case it is a 
New York corporation—its legal home is in the State of New York. 
The proceeding is somewhat in the nature of a proceeding in rem. as 
in the case of a vessel. The vessel is brought into court, theoretically, 
and in contemplation of law is before the tribunal; the parties in 
interest all over the world are notified in manner prescribed by 
statute and are bound by the decree of the court; there results a decree 
of sale of this personal propeiiy as against all owners, lienors, and 
others, and title absolute passes to the purchaser. The rights of the 
former owners, etc., are thus transferred to the proceeds of sale. This 
is an illustration. As I said at the previous hearing, the principle 
which sustains the bill you have passed lies in the public use—the 
public necessity. I have no doubt in this case that the Government 
will be able to show that the public use, national interest or necessity, 
requires the ownership of the stock; for it is not merely the owner¬ 
ship of the majority, or of nearly all of the stock, that will enable the 
United Setates to devote the Panama Railroad to all the uses which 
the public interests require in the construction of the canal. You 
require all of the stock to fully utilize the railroad in the construction 
of the canal. 

Air. Adamson. I desire to ask you a question which Air. Shackle¬ 
ford says is not a repetition of the record, in regard to these decisions 
in the States. 

Air. Cromwell. Massachusetts and Connecticut ? 

Air. Adamson. Yes. Does it appear that the State owned the ma¬ 
jority of the stock? 

Air. Cromwell. No, sir; private ownership. In principle, how¬ 
ever, I do not think it makes any difference; and in the present case 
there is the additional reason of necessity for public use. 

Mr. Adamson. I do not think there is any doubt of our right, and I 
do not think there is any doubt of our power. The question is 
whether it is necessary to do that. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


135 


Mr. Cromwell. The necessity and justification lies in this. The 
Panama Railroad is a necessary instrument for the completion of the 
canal. It is the only railroad empowered to operate upon the Isth¬ 
mus. It has an exclusive concession to that effect. That concession 
has sixty years to run, and it underlies even the treaty between the 
United States and Panama. It follows that this railroad is a neces¬ 
sity in the construction of the canal, which is a public work of super¬ 
lative utility. 

Now, as long as any of the stock is outstanding the road must be 
operated as a commercial road, for profit. The public need dominates 
all other views on this subject, and, in my opinion, justifies a court in 
expropriating the outstanding shares to the public use, so that the 
United States may operate the railroad without profit, if it chooses, 
and untrammeled by the requirement of using it for commercial pur¬ 
poses, if need be; that it may use the railroad as an instrument of 
construction, just as it may use any other instrumentality. 

Mr. Esch. Conceding the right of the Government to maintain the 
steamship line on the Atlantic, supposing the Government condemned 
all the outstanding stock, and thus became the owner of the railroad 
and the steamship line, could not the Government continue this exclu¬ 
sive contract with the Pacific Mail Steamship Company ? 

Mr. Cromwell. Under the law, you mean? 

Mr. Esch. Yes, sir. 

Mr. Cromwell. Do you mean for the United States to continue it 
as the direct owner of the railroad and steamship property, or do you 
mean through the corporation itself ? 

Mr. Esch. As the owner of the property. We would become the 
owners of the property. 

Mr. Cromwell. If the United States acquires all the outstanding 
stock, of course the corporation would exist just the same. The only 
change taking place would be the change of ownership of stock, and if 
the United States chose to continue in that relation, then the business 
would still go on through the corporation in any manner that the 
United States as the single stockholder might dictate. 

Mr. Mann. Suppose that we should absorb the Panama Railroad 
corporation, then what would be the effect of the exclusive contract 
on the Pacific Mail Steamship Line? Suppose the Government 
acquired the ownership of all the stock? 

Mr. Cromwell. Yes, sir. 

Mr. Mann. And then proceeded to absorb the Panama Railroad 
Company and became the owner, simply as the Government? 
Would the Government then have the right to maintain an exclusive 
contract with the Pacific Mail Company ? 

Mr. Cromwell. You mean as a matter of law? 

Mr. Mann. Yes, sir. 

Mr. Cromwell. You mean as a matter of public policy and law? 

Mr. Mann. Yes; or have you given consideration to that subject? 

Mr. Cromwell. I have considered it, but I would prefer not to 
express it just now, if vou will kindly excuse me. 

Mr. Adamson. Suppose we take the instance mentioned just now, 
and in lieu of condemnation proceedings let the court administer 
and we buy the property. Would not we then become the assignee of 
every right and obligation that this railroad company has? 


136 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Cromwell. That would require proceedings for judicial disso¬ 
lution under the law of New York, and it would be necessary for the 
United States, in order to become the purchaser of the property, to 
make a bid large enough to pay off all the debts of every character 
and such sum as would be competitive with strangers. 

Mr. Adamson. My object was to suggest to your mind the legal 
aspect of the question; that is, if we purchased the property we 
would take over the rights and the contracts and everything else. 

Mr. Cromwell. Certainly; the United States then would be the 
direct owner of the property, just as it is now of the canal property. 

Mr. Townsend. What arrangement do you make, or has the rail¬ 
road made, with the United States Government down there now in 
the operation of the canal ? 

Mr. Cromwell. In the operation ? 

Mr. Townsend. Yes, sir; for its assistance to the canal work there? 

Mr. Cromwell. The railroad company transports material, sup¬ 
plies, etc., for the Government at fixed rates and serves all the require¬ 
ments of the Government at a specified tariff; but, as you know, the 
Government is not yet actively carrying on actual construction 
work on the Isthmus in a manner to require any important use of the 
railroad. The construction work of the United States, as you know 
so well, is at present confined mostly to the excavation at the Culebra 
cut, the sanitary work, and the terminal ports. Up to this time we 
have been able to satisfy all demands without undue tax upon our 
railroad facilities. 

Mr. Townsend. Does the Panama Railroad Company own those 
sidings where they take off the dirt? 

Mr. Cromwell. Yes, sir; all the sidings are owned by the rail¬ 
road company. We own about 25 miles of sidings. But wdiere the 
excavation is made—disconnected from our road—the tracks are 
now owned by the Government. 

Mr. Townsend. Those are leased to the Government now ? 

Mr. Cromwell. No, sir; they do not operate over them to any 
extent yet. They dispose of the excavated material over the tracks 
acquired from the canal company. 

Mr. Tow t nsend. Have you any account with the United States,, 
showing what they have paid the railroad company? 

Mr. Cromwell. Yes, sir. 

Mr. Townsend. Could you give an itemized account of that? 

Mr. Cromwell. Yes, sir; there is nothing that you w T ant that we 
can not give you if you will but give us a few days in which to fur¬ 
nish it. The accounts and records of the company are marvels of 
detail. 

Mr. Wanger has requested me to present a copy of the railroad con¬ 
cession now existing with the Republic of Panama, and I do. 

It is marked Exhibit 16. 

(Thereupon the committee adjourned.) 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


137 


Exhibit 16. 


Con cession a u\ contract between the United States of Colombia (Republic 
of Panama] and the Panama Railroad Company, made in 1867, as modified 
18f)] HE C0N1RACTS MADE IN ^16 AND 1880, AND BY AMENDMENTS OF AUGUST 18. 


(ON I RAC 1 REFORMATIVE OF THAT OF loTH APRIL. 1850, CONCERNING THE CONSTRUC- 
IION 01* A RAILROAD FROM ONE OCEAN TO THE OTHER, ACROSS THE ISTHMUS OF 
PANAMA. 

The secretary of finance and public improvements of the United States of Co¬ 
lombia dul \ authorized by the executive power, on the one part, and on the other 
George M. Totten, engineer in chief and general agent of the Panama Railroad 
Company, with full power and authority from the directors of said company; 
having in consideration the stipulation in Article II of the contract made with 
said company, and approved by the legislative decree of the 4th of June, 1850; 
and desiring to provide whatever may be needful for the perfection of the work 
of the said railroad, in order that it may better answer the necessities of the 
commerce of the world, and at the same time furnish a sure and permanent reve¬ 
nue to the treasury of the Republic, have agreed to modify and reform the said 
contract in the terms set forth in the following stipulations: 

Article I. 


The Government of the United States of Colombia concedes to the Panama 
Railroad Company the use and possession, for ninety-nine years, of the railroad 
constructed by it, and which actually exists between the cities of Colon and 
Panama. This concession comprises not only the road, but also the buildings, 
warehouses, wharves, dockyards, telegraph between Colon and Panama, belong¬ 
ing to the road, and in general all the dependencies and other works of which 
the said company is now in possession, necessary to the service and develop¬ 
ment of the enterprise, and those which in the future it may establish with the 
same purpose. 


Article II. 

The Government of the Republic binds itself, during the time that the exclu¬ 
sive privilege which is conceded to the company for the working of the railroad 
remains in force, not to construct for itself, nor to concede to any person or com¬ 
pany, by any title whatever, the power to establish any other railroad on the 
Isthmus of Panama ; and it also stipulates that, while the said privilege con¬ 
tinues in force, the Government shall not have the power of undertaking for 
itself, nor permitting any person to undertake, without the concurrence and 
consent of said company, the opening or working of any maritime canal which 
may unite the two oceans across the said Isthmus of Panama to the west of the 
line of Cape Tiburon on the Atlantic and Point Garachine on the Pacific. But it 
remains stipulated that the right which is conceded to the company to give its 
consent does not extend to its opposing the construction of a canal across the 
Isthmus of Panama (except on the actual route of the railroad itself), but only 
to its exacting an equitable price for such privilege and as indemnification for 
the damages which the railroad company may suffer by the rivalry or competi¬ 
tion of the canal. 

If the sum which may he demanded by the company shall not appear equitable 
to the Government of the United States of Colombia, then it shall be fixed by 
arbitrators in New York or Panama, one to be named by the Government and the 
other by the company, and in case of their not agreeing the two shall name a 
third, whose decision shall be without appeal. 

In pronouncing their decision the arbitrators shall take into consideration the 
grounds upon which the company rests, and the information which the Govern¬ 
ment shall give upon the matter, and in view thereof they shall decide without 
appeal as they may deem most just and equitable. 

The sum, whatever it may be, which shall be finally designated, shall belong 
one-half to the railroad company and one-half to the Government of Colombia. 


138 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Article III. 

In compensation of and as a price for these concessions, the railroad company 
binds itself to pay to the Government of the United States of Colombia one mil¬ 
lion cf dollars in American gold, or in hills on New York payable in the same 
kind, as the Government may elect, on the day on which this contract shall be 
approved by Congress, and to pay from the present time, and until the expira¬ 
tion of the present privilege, an annual revenue of $250,000® in American gold. 
The company will make the payments quarterly in New York to the agent des¬ 
ignated by the Government of the United States of Colombia, or if the Govern¬ 
ment should desire, the company will place the money in London or Panama, the 
Government giving the necessary notice to the company in New York. These 
quarterly payments shall commence to count from the date of the approval of 
this contract by Congress. 

From the revenues which the Government acquires by this contract there 
shall be set apart annually during the twenty years twenty-five thousand dollars, 
which the company shall deliver to the Government of the State of Panama. 

Article IV. 

The company binds itself to extend the railroad on the Pacific side to the 
islands of Naos, Culebra, Perico, and Flamenco, or other place in the bay where 
there may exist a permanent depth of water for large vessels. 

Whereas a certain contract was made between the Government of the L T nited 
States of Colombia and the Panama Railroad Company, dated the fifth day of 
July, one thousand eight hundred and sixty-seven, in abrogation of and to take 
the place of another contract between the same parties of the fifteenth day of 
April, one thousand eight hundred and fifty, which first-mentioned contract was 
afterwards approved by the said Government, by legislative decree, on the six¬ 
teenth daj of August, one thousand eight hundred and sixty-seven, with certain 
modificrticns, which modifications were accepted by the said railroad company; 
and whereas it was stipulated by the said new contract, by Article IV of the 
same, that the said railroad company should extend its railway to the islands 
of Naos, Culebra, Perico, and Flamenco, or any other place in the bay of Pan¬ 
ama where a permanent anchorage may be found for large vessels, as by refer¬ 
ence to said contract will more fully and precisely appear"; 

And whereas the said railroad company has not yet completed the said work, 
and denies any present obligation to proceed with the same; and whereas the 
Congress of the United States of Colombia, on the twenty-sixth day of July, one 
thousand eight hundred and eighty, by an act passed on that day, authorized the 
exeeuthe power of the said United States of Colombia to enter into negotiations 
with the Panama Railroad Company, in order to declare it liberated from the 
obligations it assumed by the aforesaid Article IV of the contract made on the 
sixteenth day of August, one thousand eight hundred and sixty-seven, for the 
extension of the said railway in the harbor of Panama as aforesaid, by which 
act a sum of money was to be paid to the said Republic of the United States of 
Colombia sufficient, in the judgment of the executive power of the said Gov¬ 
ernment. to compensate for the release from the said article as aforesaid; 

And whereas the national executive power of the said Government has ap¬ 
pointed Mr. Solomon Ivoppel as its agent and attorney for the purpose of nego 
tiating with the said railroad company for the abrogation of the said Article IV. 
and has given to him full, complete, and absolute power to enter into, carry out, 
and conclude, in the name of the Government of the United States of Colombia, 
the negotiations for the purpose of abrogating the aforesaid Article I V of the 
said contract; 

And whereas the chief executive of the said Republic of the United States of 
Colombia has exercised the discretion conferred upon him by the aforesaid act of 
Congress, by the issue to the said Solomon Ivoppel of instructions by which the 
•said Solomon Ivoppel, as such agent and attorney of the Government of the 
United States of Colombia as aforesaid, is directed to negotiate only for an 
exemption or abrogation of the aforesaid Article IV for a period of not exceeding 
thirty consecutive years, and has further exercised the aforesaid discretion and 


a Note. —$225,000 of this annual subsidy was advanced and paid by the com¬ 
pany to the Colombian Government in November, 1880, for the full period inter¬ 
vening up to March 27, 1908. 









INVESTIGATION OF PANAMA RAILWAY COMPANY. 


139 


authority conferred by the said act of Congress by fixing the amount to be paid 
by the said Panama Railroad Company for the abrogation of tbe said Article IV, 
and which, by tbe aforesaid written instructions, is limited to the sum of ten 
thousand dollars per annum for each of the years during which the said Article 
IV is suspended or abrogated. 

And whereas the said Solomon Koppel is now in the city of New York, and has 
had a negotiation with the Panama Railroad Company touching the matters 
aforesaid, and has agreed with the said company to the suspension of the said 
Article IV for the full period of thirty years from the first day of November, one 
thousand eight hundred and eighty, upon condition that the said company should 
pay to the said Government of the United States of Colombia the fuli sum of ten 
thousand dollars per annum for each of the said thirty years, making an aggre¬ 
gate payment to the said Government for the suspension and abrogation afore¬ 
said of three hundred thousand dollars in American gold, in all of which actings 
and doings the said Solomon Koppel has complied exactly with the written 
instructions of the said chief executive of the United States of Colombia as the 
same were communicated to him. and as the same have been handed by him to 
the Panama Railroad Company. 

Now, therefore, this agreement witnesseth that, in consideration of the prem¬ 
ises and for the aforesaid sum of three hundred thousand dollars in gold coin, 
payable at the rate of ten thousand dollars in each year from the execution hereof 
by the Panama Railroad Company to the United States of Colombia, the said 
Government has fully exonerated, released, and discharged, and does hereby fully 
exonerate, release, and discharge the said Panama Railroad Company from all 
Its obligations of every nature whatsoever arising upon or growing out of the 
aforesaid Article IV of the contract of the fifth day of July, one thousand eight 
hundred and sixty-seven, by which article the said company was bound to extend 
its railroad cn the Pacific side, as is provided in and by the said contract, to 
which special reference is hereby made, and the said contract, in so far as con¬ 
cerns the extension of the said railroad into the Hay of Panama aforesaid, is 
hereby, in accordance with the fuli power granted to the chief executive of the 
said Government by the Congress of the United States of Colombia, abrogated 
and annulled. But this abrogation, suspension, and annulment of the said Arti¬ 
cle IV shall continue only for the period of thirty years from and after the first 
day of November in the year one thousand eight hundred and eighty, and at the 
expiration of the said term of thirty years the said Article I V of the said original 
contract of the fifth day of July, one thousand eight hundred and sixty-seven, 
shall again be revived, and shall be and remain thereafter in force and effect as 
the same now exists. And the said Panama Railroad Company, in consideration 
of the aforesaid suspension, release, and abrogation of the said Article IV for 
the term and period as aforesaid, hereby agrees to pay to the said Government 
of the United States of Colombia the just and full sum of three hundred thou¬ 
sand dollars in gold coin as follows, viz: The sum of ten thousand dollars on the 
first day of November in each and every year, payable in the city of New York, 
during the said term of thirty years, the first of said annual installments to be 
payable on the first day of November, which will be in the year one thousand eight 
hundred and eighty-one, and cn each first day cf November thereafter until the 
whole sum of three hundred thousand dollars shall have been paid. And it is 
further provided and agreed that in case the said Panama Railroad Company, 
or its successors, shall determine to extend its said line of railway to the islands 
in the Bay of Panama, or to deep water, in accordance with the terms of said 
Article IV as originally agreed, and shall actually construct the same, that then 
and fr'm thenceforward the annual payment of ten thousand dollars for each of 
said thirty years shall cease for the remainder of said term then unexpirecl, 
anything herein contained to the contrary in any wise notwithstanding; but 
this termination of said annual payments shall not take effect until the expira¬ 
tion of six months after said Panama Railroad Company shall have given notice 
to the Government of the United States of Colombia of the actual completion of 
said extended line i.i the Bay of Panama as aforesaid.—[Contract of 1880.J 

Article V. 

During the whole term of this privilege the company shall have exclusive right 
to establish across the Isthmus of Panama within the zone indicated in article 
second, any class of carriage roads whatever, from one ocean to the other. The 
Colombian" Government binds itself not to undertake for itself, nor to permit any 
other <■ mpany or person to undertake within said zone any other carriage load, 


140 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


either macadamized, or of plank, or of any other class suitable for the use of 
wheeled vehicles, between the two oceans across the Isthmus of Panama. It 
being, nevertheless, well understood that the privilege of which this article treats 
can not and must not in any manner prevent the construction of any kind of 
roads in a direction distinct from that expressed, nor the completing, preserving, 
and improving of roads already existing, or which are actually being constructed 
on said Isthmus. 

Article VI. 

The company shall have the right for the whole term of this privilege: 

1st. To regulate and direct the use of the ports, embarking and disembarking 
places, wharves, anchorage grounds, etc., at the termini of the railroad, and to 
establish agents with powers to carry into effect the regulations that it may 
make in this particular in conformity with the laws of the Republic. These 
regulations shall be submitted to the approval of the executive power, without 
which they can not take effect. The executive power may refuse its approba¬ 
tion, alter and revoke them as it may deem convenient; 

2d. To use the embarking and disembarking places, wharves, etc., that it has 
constructed or may construct in the ports situated at the two extremes of the 
road; 

3d. To use the landings necessary, and especially those designated for the 
storage and free deposit of all goods and merchandise admitted for transit over 
the Isthmus on the railroad constructed by the company. By virtue of this 
privilege the company may collect as compensation for the use of the line of 
communication, means of transportation, landings, warehouses, and establish¬ 
ments of all kinds belonging to it, such tolls for transporting, wharfage, storage, 
and labor as it may deem proper to establish. 

The company continues in the exercise of all the rights conceded to it in the 
0th article of the contract of 5th of July, 1867. Consequently it may regulate 
and direct the use of the ports, embarking and disembarking places, wharves, 
anchorage grounds, etc., at tbe termini of the railroad, and establish agents 
with powers to carry into effect the regulations that it may make in this particu¬ 
lar in conformity with the laws of the Republic. These regulations shall be 
submitted to the approval of the executive power, without which they can not 
take effect: but the executive power, after having once approved them, can not 
change them nor revoke them without the consent of the company.—[Art. I of 
Contract of 1870.] 

Article VII. 

The executive power shall determine the forms to be observed in the landing 
of goods on either ocean; and the intervention therein of the officers of the 
Republic to prevent the effects destined for transit from one ocean to the other 
from being left on the way or fraudulently introduced for internal consumption. 
Said precautions shall be such as may tend to prevent all frauds to the injury 
of the public revenue without delaying or embarrassing the rapid dispatch and 
transit of passengers and packages of merchandise, luggage, and goods of all 
kinds which may be subjects of lawful commerce 

Article VIII. 

The company may give to the actual railroad a different direction from that 
which it now has, and which it may deem most favorable to the enterprise, it 
being free to choose the points of departure and arrival which may appear to it 
most advantageous and most convenient for the entrance and "anchorage of 
vessels, or for ports properly so called, and for embarking places, dry docks, 
places for lighterage, landings, warehouses, stations, hotels, and establishments 
of all kinds, and this without prejudice to what is stipulated in article fourth 
of this contract. 

Article IX. 

The Government of the United States of Colombia ratifies the concession 
made to the Panama Railroad Company by the contract of the 15th of April, 
1850: 

1st. Of the lands that it has required and that it may require for the estab¬ 
lishment of the line of railway in its whole extent, provided such lands belong 
to tbe Government; 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


141 


J(I. Of the lands which were necessary for seaports, dry docks, river -ports, 
landings, embarking places, places for lighterage, warehouses, stations, hotels, 
and generally for all the necessities of the service of the railroad, always pro¬ 
vided that such lands shall be the property of the Republic; 

dd. Of the concession made by gratuitous title and in perpetuity of sixty-four 
thousand hectares of vacant lands in the territory of the State of Panama, with 
exception of the islands in both oceans and of the districts which formed on 
the 1st of January. 1849, the territories of “Boons del Toro” and of “Darien,” 
limits of which were iixed by the law of the 9th of January, 1855. This con¬ 
cession may be extended to ninety-six thousand hectares if there shall be that 
number disposable within the limits of the ancient provinces of Panama and 
1 eraguas in such manner that the Government can adjudicate them as vacant 
lands; and the company shall have the right to select them in the continental 
part of said provinces as they may deem most convenient. P>ut it is stipulated 
that in the lands which the company may select on the line of road, and its 
vicinity, there shall positively be left regular intervals equivalent in extent to 
those (tracts) which shall be given to the company, in order that the Govern¬ 
ment may be enabled to make grants or sales of land for other establishments 
which may desire to locate themselves on the line and in the neighborhood of 
the road. 

Paragraph. The lands granted to the company by sections first and second 
of this article shall be returned to the Republic at the expiration of the present 
privilege in the terms and with the formalities prescribed in this contract. 


Article X. 


In the grant of vacant lands in perpetuity made to the company by the con¬ 
tract of 1850 and ratified in section third of Article IX of this contract there is 
not included the number of hectares contained in the island of “ Manzanillo,” 
in the Bay of “ Limon,” but they are included in the grants treated of in the 
first and second sections of the article cited, with the exception of four hectares 
which the Government reserves as an area for the construction of buildings for 
public offices, schoolhouses, prison, and other objects of public use, which shall 
be delivered by the company properly graded and in condition for building upon 
them. But it is understood that in the designation by the Government of the 
place or places in which it desires to take the four hectares reserved to it by 
this article, it shall not choose those which may be necessary for the construc¬ 
tion and service of the railway and its dependencies, nor those which may be 
already occupied by buildings now standing or which are to be reconstructed. 

This selection may be made by the Government, in anticipation, as it may see 
fit, in accordance with the plan of the city, in order that the lands may be deliv¬ 
ered to it so soon as the nature of the ground permits of the grading being 
carried on. 


Article XI. 

The lands conceded to the company by article ninth, section third, shall be 
delivered as may be requested on compliance with the legal formalities estab¬ 
lished for such cases, and it being incumbent on the company to prove their 
character as vacant lands, to measure them, and to make the respective plans. 
The adjudication of said lands shall be made by the executive power, and from 
the time the declaration is made in the premises they shall be considered defi¬ 
nitely adjudicated to the company ; but the provisional adjudication shall be 
made by the President of the State of Panama, submitted always to the exami¬ 
nation and approval of the national executive power, and while not disapproved 
it will only produce the effect of preventing any ulterior grant of the same lands 
in favor of a third party. The Republic is not bound in any case to the vacating 
and guaranteeing the title of the vacant lands which may be adjudicated to 
the company. 

The executive power will fix a time in agreement with the company within 
which the latter shall be bound to designate the vacant lands to which it has 
the right. 

Article XII. 

When the lands which may be required for the extension of the line of the 
railroad, as referred to in article fourth of this contract, or for changes of direc¬ 
tion of the line, or for the establishment of a second line of rails, shall be the 


142 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


property of private individuals, the company shall have the right to obtain 
them oil an official appraisement and the just indemnification of the proprietor, 
in conformity with the dispositions of the law of the 22d of May, 3N60, con¬ 
cerning the mode of proceeding in those civil cases, the cognizance of which 
appertains to the tribunals of the Union. ' 

Article XIII. 

The railroad enterprise is esteemed of public utility. 

Article XIV. 

The company is authorized to propose to the executive power the regulations 
which it may judge proper for the police, security, and preservation of its ways 
of communication, ports, works, and establishments of all kinds ; but such 
regulations shall not be put in force without the express approval of the execu¬ 
tive power, which even after having approved them may amend or annul them 
as it may deem proper, proceeding always in conformity with the laws of the 
Republic. 

The company continues authorized to propose to the executive power the regu¬ 
lations which it may judge proper for the police, security, and preservation ot 
its ways of communication, ports, works, and establishments of all kinds. 

Such regulations shall not be carried into effect without the express approval 
of the executive power; but the latter, after having approved them, can not 
change them nor annul them without the consent of the company.—[Art. II of 
Contract of 1876.] 

Article XV. 

The tariff of charges and freights on money, carriage of merchandise, and 
transport of travellers over the railroad, board and storage in the depots, and 
establishments of the company, shall be fixed by it. and modified as it may deem 
best for its interests, but it shall be bound to inform the local authorities of 
said tariffs and modifications with at least thirty days’ previous notice. 

Article XVI. * 

The company binds itself to transport gratis over the railroad the National 
and State mails that may have to be carried from ocean to ocean or to any 
intermediate point; and it may make such pecuniary arrangements as it thinks 
proper for the transportation of foreign mails, the passage of which over the 
Isthmus is declared free to all nations; but the Government of the Republic 
may prohibit the passage by the railroad of the mails of those nations that may 
be at war with it. in which case the company shall refuse to carry them over 
the railroad. 

Article XVII. 

The company may freely introduce into the Isthmus without payment of 
duties or imposts of any kind all the implements, machines, tools, materials, 
provisions, and manufactured articles intended for the construction, working, 
and preservation of the railroad, and the provisioning of the workmen em¬ 
ployed on it. 


Article XVIII. 

The company is exempt from paying taxes or contributions, national, munici¬ 
pal of the State, or of any other kind, upon the railroad, its warehouses, 
wharves, machines, or other works, things, and effects of any kind belonging to 
it and which, in the judgment of the executive power, are necessary for the serv¬ 
ice of the said railroad and its dependencies. 

Article XIX. 

In compensation for these exemptions, the company binds itself to transport 
gratuitously and without the Government having to pay anything either for 
freight or for any other cause, the troops, chiefs, and officers, and their equi¬ 
page, ammunition, armament, clothing, and all similar effects that may belong 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


143 


to, ore. or may be destined for the immediate service of the government of the 
Republic, or of the .State of Panama, as also their officials in service or in com-' 
mission, and those individuals who with their families and baggage may come 
to tlie country in the character of emigrants and of new settlers, with the per¬ 
manent character of such, for account of the Government, up to the number of 
2,000 annually. The executive power shall dictate the provisions as it may 
deem proper in such cases, in order to prevent those passengers whose entry 
into Colombian territory may he purely accidental from availing themselves of 
this concession. 

The executive power of the union shall dictate the provisions which may be 
necessary, at the request of the company, to prevent abuses in the gratuitous 
passage which Article XIX of the aforesaid contract concedes to national em¬ 
ployees and those of the State of Panama.— [Art. IV of contract of 1876.j 

Article XX. 

Colombian productions shall be transported by the railroad during the first 
twenty years of this contract, paying only one-half the rates of freight or trans¬ 
portation previously fixed by the company for foreign products of the same 
class, but this term being concluded they shall pay a charge or freight not ex¬ 
ceeding two-thirds of that previously fixed in the tariff of the company—tariff 
rates which the company can not increase in future in regard to Colombian 
productions. (See amendments of Aug. 18th, 1891.) 

In order that Colombian products may be transported by the railroad under 
the conditions of Article XX of the same contract, there must precede a declar¬ 
ation of the shipper, duly attested by the bill of lading of shipment, with a cer¬ 
tificate of the administrator of the national treasury at the port of shipment or 
other similar document, at the time of offering them, that such products are 
really Colombian; a necessary condition, without which there shall be no 
ground for any claim.— [Art. V of contract of 1876. | 

Article XXI. 

Passengers, money, merchandise, objects, and effects of all kinds destined for 
interoceanic transit over the railroad, while they remain in the warehouses and 
depots of the company, or in its possession, are exempt from dues and taxes, 
national, municipal of the State, or any other description. In like manner the 
vessels which may enter the ports at the termini of the railroad, as well as 
their officers, crews, and their agents, shall be exempt from the payment of 
tonnage dues or of any other tax or contribution whatever on account of service 
applied directly to the interoceanic transit. 


Article XXII. 


Travellers passing from one sea to the other over the railroad shall not 
require any passports to pass over it, excepting in cases of foreign war or 
internal commotion, when the Government may deem the presentation of pass¬ 
ports expedient for the security of the country or the preservation of public 
order. Nevertheless, persons who have been expelled from the territory of the 
Republic, or other individuals whom the laws forbid an entrance into the coun¬ 
try, shall not pass over the railroad. 

Article XXIII. 

In case the present privilege conceded to the company shall be declared for¬ 
feited by the competent tribunal, it shall return to the Republic such lands 
"ranted in ownership, and by gratuitous title, as may not be already transferred 
f n fee to the third party, and it shall have no right to exact any indemnification 
for improvements, nor for any other cause. 

Article XXIV. 


It is obligatory upon the company to make a survey of the lands, with notice 
to the owners of adjoining lands, and to make a topographical plan of the road, 
with all its dependencies, such as bridges, aqueducts, viaducts, and other works 
which it may have constructed for the service of the railroad, in order that by 


144 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


means of such plan it may be clearly known what the company holds in owner¬ 
ship, and to what purpose the exemptions provided for are destined. 

Article XXV. 

The company binds itself to execute constantly, with all care, punctuality and 
celerity, the transportation of the travellers, cattle, merchandise, goods and 
materials of all kinds that may be confided to it, payment being made of the 
charges and prices of transportation that may be fixed in the respective tariff. 
The disposition of this article is, nevertheless, no obstacle to the company’s 
entering into special contracts for the transportation of articles whose bulk, 
weight, or exceptional nature do not allow of their freights being fixed before¬ 
hand. 

The provision of the final part of Article XXV of the aforesaid contract of 
1867, by which the company was permitted to enter into special contracts for 
the transportation of articles whose bulk, weight, or exceptional nature would 
not allow of their freights being fixed beforehand, is made applicable to all 
kinds of articles of commerce.—[Art. Ill of Contract of 1876.] 

Article XXVI. 

Vessels of nations which may be at war with the United States of Colombia 
shall not be admitted to the ports situated at either extremity of the railroad, 
nor shall the productions, effects, and property of such nations enjoy the free 
transit of the Isthmus over the said road. 

Article XXVII. 

It is obligatory upon the company to maintain constantly in Panama or Colon 
a representative with sufficient power and authority to treat, whenever it may 
be necessary, personally with the Government on matters having relation to the 
enterprise. 

Article XXVIII. 

The present privilege cannot be ceded or transferred to any foreign govern¬ 
ment, that is to say, to any government existing outside of Colombian territory, 
under pain of forfeiture of the said privilege by the mere act of attempting or 
verifying such cession or transfer, which act, from the present time, is declared 
absolutely null and of no value or effect. This privilege shall also be forfeited 
in case the railroad company shall not execute the transportation during a 
period exceeding four consecutive months (fortuitous cases excepted). 

This privilege will also be forfeited by the failure of payment, after being one 
year overdue of any of the quarterly payments. Delay in the payments for a 
less period subjects the company to the payment of interest at the rate of seven 
per cent per annum. 

Mone of the cases of forfeiture of the privilege fixed in Article XXVIII shall 
go into effect until the resolution of the government in which the declaration of 
forfeiture is made is served in due form, and at least three months in advance, 
on the company and on the agents of the persons to whom the government may 
transfer or hypothecate the revenue to which it is entitled by Article III, if said 
transfer or hypothecation shall have taken place; it being understood that if, 
after the notification has been given, and during the aforesaid three months, the 
company, or the interested persons of whom mention has been made, shall sat¬ 
isfy the Government, causing the reason for complaint or forfeiture to disap¬ 
pear. the said declaration shall not be carried into effect.—[Art. VI of Contract 
of 1876.] 

The Government reserves to itself the right to hypothecate, in whole or in 
part, the revenue, of which mention has been made in Article VI of this con¬ 
tract (except the right of the State of Panama to the annual proportion of 
$25,000), before the time at which said revenue is to be paid, and whatever may 
be hypothecated shall be payable in such a manner as the Government may 
direct; and the railroad company binds itself, on being notified of any transfer 
or hypothecation, to accept it and to make payment at the maturity of the instal¬ 
ments to the persons or parties in whose favor the transfer or’ hypothecation 
may have been made.—[Art. VIII of Contract of 1876.] 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


145 


Article XXIX. 

In case of flic forfeiture of this privilege from any cause, the ownership and 
lull possession of the railroad, with all its dependencies, appurtenances, and 
accessories, shall pass to the Republic without the company’s having thereby 
any right to indemnification or remuneration of any kind. 

Article XXX. 

The Government of the Republic binds itself to protect and maintain in all 
their integrity the rights of the company resulting from the present contract, 
provided the company complies punctually on its part with the duties and 
obligations which H undertakes, and that the privilege continues in force. 


Article XXXI. 

The right which said Republic reserved to itself by the contract of the 15th of 
April, 1850, to redeem the privilege of the company, being especially hypothe¬ 
cated as an additional security for the loan contracted by the said Republic in 
London under date of the 1st of October. 1863, it is stipulated that the products 
from the railroad, which by this contract belong to the Government, remain sub¬ 
sidiarily applicable to the payment of the obligations of the Government of the 
Republic, in regard to that loan, whether it be to complete the annual install¬ 
ments which the Government is obliged to pay in London on account of the 
interest and amortization of the capital, or to redeem the bonds of the loan at 
par, if in 1871 their redemption shall not have been completed. 

Article XXXII. 

In consequence of the stipulation in article third, the Government renounces 
the benefit or participation of three per cent, which by article fifty-five of the 
primitive contract it had in the net products of the enterprise, and the quota of 
five per cent which had also been reserved in its favor by article thirty of said 
contract in the transportation of correspondence, and which quota it was stipu¬ 
lated should not be less than ten thousand dollars annually. The account of 
these profits shall be liquidated immediately iu the terms fixed by article fifty- 
five up to the day on which the present contract begins to rule and have effect, 
and the payment of the balance which may result in favor of the Republic shall 
be made by the company in New York to the order of the Government. 

Article XXXIII. 

Questions which may arise between the Government of the Republic and the 
railroad company concerning the understanding or the fulfillment of this con¬ 
tract, shall be decided by the courts and tribunals of the Colombian Union 
according to the constitution and laws of the Republic. 

Questions that may arise between the Government of the Republic and the rail¬ 
road company, as to the understanding or the execution of this contract, and of 
those of 1850 and 1867, to which this one refers, shall be decided without appeal 
by the federal supreme court of the Colombian Union, without the intervention 
of any other tribunal.—[Art. VII of Contract of 1876.] 

Article XXXV. 

The ninety-nine years of the duration of the privilege conceded by this con¬ 
tract shall be counted from the date on which it may be approved by the Con¬ 
gress.® 

Article XXXVI. 

At the expiration of the term of the privilege, and by the sole fact of its 
expiration, the Government of the Colombian Union shall be substituted in all 
the rights of the company, and shall enter immediately into the enjoyment of 

4 


a Note. —Which was August 16, 1867. 
PAN RY —05-10 




146 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


the line of communication, of all its fixtures, of all its dependencies, and of all' 
its products. The company shall be bound to deliver to the Government, in 
good order, the roads, the works which compose them, and their dependencies, 
such as landing and discharging places, offices, machines, and in general what¬ 
ever movable or immovable objects, whether destined for the especial service 
of transportation or applicable to any other object connected with the enter¬ 
prise. N 

Article XXXVII. 

The present contract contains all the concessions and privileges which the 
existing Panama Railroad Company has acquired for the future. In virtue of 
which it is declared, and the parties hereby expressly agree, that at no time can 
the company claim rights or privileges which are clearly not contained in this 
contract, unless they may be granted by subsequent acts. 

Article XXXVIII. 

The contract of the 15th of April, 1850, approved by the legislative decree of 
the 4th of June of the same year, is hereby reformed by the terms of the present 
contract; and extended as it is in thirty-eight articles, it shall be submitted 
to the approval of the Executive Power of the Republic, and, when obtained, 
it shall be presented to Congress, the consent of which is required in order that, 
being enacted into law, it may be carried into effect.** 


AMENDMENTS AGREED UPON BETWEEN THE PANAMA RAILROAD COMPANY AND THE 
REPUBLIC OF COLOMBIA, AUGUST 18TH, 1891. 

Article I. 

Article twenty of the contract of July 5th, 1867, approved by law No. 46 of 
the same year, shall read as follows: 

From and after July 1st, 1892, Colombian products passing over the Panama 
Railroad shall pay only half of the rate of freight established by the company 
for foreign products of the same class. 

Article II. 

Salt from the Colombian salt pits of the Atlantic coast intended for the 
national ports of the Pacific shall be transported by the same railroad com¬ 
pany at the following rates • 

A quantity not exceeding six millions of kilograms each year, and which shall 
in no case exceed 1,000 tons per month, at the rate of two dollars ($2) gold per 
ton without any deduction. Shipments of the salt referred to that may exceed 
the quantity above stated shall pay the rate that is established for the other 
Colombian products in the previous article. 


[Translation.] 

MODIFICACIONES CONVENIDAS ENTRE LA COMPANIA DEL FERROCARRIL DE PANAMA Y 
LA REPUBLICA DE COLOMBIA, FECHA 18 DE AGOSTO DE 1891. 

Articulo I. 

El articulo 20 del Contrato de 5 de Julio de 1867, aprobado por la ley 46 del 
mismo a no. se modifiea modo siguiente: 

Desde el 1° de Julio de 1892, los productos colombianos que pasen por el 
Ferrocarril de Panama pagar&n solamente la mitad de la rata de fletes esl^b- 
lecida por la Comapnia para los productos extranjeros de la mismo clase. 


o Note.— Congress approved August 16, 1867. 





INVESTIGATION OF PANAMA RAILWAY COMPANY. 147 


Articulo II. 

Le sal de las salinas colombianas de la Costo del Atlantico que se destine a 
los puertos naeionales del i'acifico sera trasportada por la Compania del Ferro- 
carril a las ratas siguientes : 

T na cantidad (pie no exeeda de seis milliones de kilogramos cada ano, y 
que no pase en ningun caso de mil toneladas mensuales, a la rata de dos pesos 
($2), oro, por tonelada sin deduccion alguna. Los embarques de la sal referida 
que excedan de la cantidad arriba expresada, pagar&n la rata que se fija para 
los demas productos colombianos en el articulo anterior. 


Committee on Interstate and Foreign Commerce, 

House of Representatives, 
Washington , D. O., February 20 , 1905. 

The committee met at 10.30 o’clock a. m., Hon. James R. Mann 
(acting chairman) in the chair. 

STATEMENT OF MR. DRAKE—Continued. 

Mr. Townsend. You were asked to bring us some information 
this morning? 

Mr. Drake. Yes, sir. 

Mr. Townsend. Have you done so? 

Mr. Drake. I have, sir. I was asked to indicate the amounts 
paid to members of the committee and members of the board of 
directors, and also the dividends which have been paid to those 
gentleman. I submit a statement here, taken from the books, giving 
all the details in regard to those matters. 

The statement referred to is here inserted in the record, as follows: 

(Exhibit 15 not furnished.) 

Mr. Townsend. Mr. Drake, have you prepared an opinion as to 
what should be the policy of the (rovernment in continuing the line 
of steamers in connection with the railroad ? 

Mr. Drake. I have, sir. I have prepared an expression of my 
opinion upon three questions here, the three questions that have 
been submitted to me for consideration; one as to the continuance of 
the steamship line, one as to the advisability of moving the general 
offices of the company to the Isthmus, and the third as to the advisa¬ 
bility of discontinuing the contract with the Pacific Mail Steamship 
Company. [Reading.] 

Up to this moment I feel that I have entirely failed, for various 
reasons, to get before your committee an intelligent, logical state¬ 
ment of my opinions on three of the most important features of the 
question before you relative to the policy to be adopted by the United 
States Government in the operation of the Panama Railroad, of 
which it has become in fact the principal owner, viz: 

1. The proposition to discontinue the operation of the com¬ 
pany’s steamship line between New York and Colon. 

2. The proposition that the general offices of the company in 
New York be closed and the management and operation of the 
railroad be entirely transferred to the chief engineer of the canal 
company on the Isthmus, provision being made to care for its 
fiscal affairs only in New York. 

3. The advisability of continuing the present contract with the 
Pacific Mail Steamship Company, or of terminating it as now 
arranged and refusing to enter into exclusive traffic relations with 
that or any other steamship company on the Pacific coast. 



148 INVESTIGATION OF PANAMA KAILWAY COMPANY. 


Regarding the first item, viz, the proposition to discontinue the 
steamship line, I think I can safely assert that the end sought to be 
obtained by that step, viz, that the line will be replaced by a sufficient 
amount of tonnage of both foreign and domestic registry which will 
be attracted to Colon to permanently provide all necessary speedy 
regular and efficient rates, will not be realized to the satisfaction of 
any but the cheaply operated foreign lines now seeking to enter the 
trade to the ultimate exclusion (by reason of lower cost of construc¬ 
tion and operation of their ships) of practically all vessels of Ameri¬ 
can registry, as is practically the case at this time with all foreign 
ports on the Atlantic coast of North and South America, except those 
now served by the Ward, Red, Clyde, and Porto Rico steamship com¬ 
panies; and some of the business of those American lines is now car¬ 
ried in foreign bottoms. 

If we consider the proposition that the ■ Government continue to 
operate the steamship line, but practically only for its own con¬ 
venience in the transportation of passengers, mails, baggage, specie, 
material, and supplies belonging to the canal company or connected 
with the canal construction at such special reduced rates as would 
naturally be applied, there can, I believe, be but one result—the opera¬ 
tion of the line will be at a loss, instead of a source of revenue. Fur¬ 
ther, such a course would deprive the various lines it is proposed to 
favor, now seeking to enter the traffic, of anticipated earnings and 
make surer the probability that the volume of business would not 
warrant them in providing for other than a port-of-call service; 
hence the more lines that enter the business the more certain will be 
the unfavorable result of their competition to themselves. 

If the question of the entire discontinuance of the steamship lines 
be considered from the standpoint'of earnings or revenue for the rail¬ 
road or the continuance of present control of its own business, I sub¬ 
mit that a discontinuance of the line would result in a total loss to 
the railroad company of all the net earnings of the steamship line, 
which for 1904 were over $175,000 and for the past ten years over 
$1,125,000 and which may be expected hereafter to be very much 
increased when the canal construction actually begins. In reaching 
the above result of earnings I have shown elsewhere in my testimony 
that the steamship line has been neither unduly favored nor discrimi¬ 
nated against. 

LOSS OF BUSINESS CONSEQUENT UPON THE ABANDONMENT OF STEAMSHIP 

LINE. 

The Panama Steamship Line furnishes, and lias furnished, the only 
direct and regular means of transportation between New York and 
the Isthmus, and it is only by furnishing such direct and regular 
transportation that the company has been enabled to maintain the 
earnings of the railroad at the figure which they have reached. All 
other fines running to Colon use that only as a port of call, giving 
thus a service slow, irregular, and not attractive to shippers. 

If this company were to abandon the steamship line there would be 
no longer such direct and regular service. Various other companies 
have indicated a readiness to take part in transportation between the 
United States and Colon, but only by making Colon a port of call. 
A certain amount of traffic would undoubtedly be carried by such 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


149 


vessels, but they would be unable to furnish the transportation requi¬ 
site to maintain the business of the route, which requires a prompt, 
regular, and trustworthy service, not subject to the delays which 
inevitably occur where a port is only one of a number at which a ves¬ 
sel calls. 

Nor can it be expected that a new direct line between. New York 
and Colon would be established to take the place of the company’s 
line. The lines from the United States making Colon only a port of 
call could take enough of the business offering to make such a direct 
line unprofitable. Regular and frequent sailings can not be expected 
except under the present system. At the present time the United 
Fruit Company has been making Colon a port of call, at the request 
of this company, for its New Orleans boats; our object in arranging 
this being to accommodate the Middle West and relieve a threatened 
pressure on the facilities of our line. But though we have made 
favorable arrangements with them they have not been willing to take 
any freight from Colon to the United States, finding cargo from 
other ports more profitable. 

To secure traffic shippers must be assured that they can rely upon 
an opportunity to dispatch their goods at regular and reasonably fre¬ 
quent intervals, and that the goods will be forwarded to their destina¬ 
tion without undue delay. These things are as important as the rates 
at which the goods are transported. For the great bulk of profitable 
traffic low rates will not compensate for uncertainty in transportation, 
and we have always found it necessary to be vigilant to secure this. 
Any failure in this respect is immediately reflected in the amount of 
business seeking the route, which falls with every such failure and 
rises with every improvement. For example, since the establishment 
of a weekly instead of a ten-day service in 1899 the total outward- 
bound business of the steamship line has increased from 53,206 tons 
in 1896, 53,230 tons in 1897, and 51,814 tons in 1898 to a total of 
107,064 tons in 1904; while the homeward business has increased from 
24,254 tons in 1896, 31,966 tons in 1897, and 34,462 tons in 1898 to 
62,230 tons in 1904. In the same period, and under the same influ¬ 
ences, the tonnage to San Francisco rose from 22,561 tons in 1896 to 
39,180 tons in 1904; while that from San Francisco to New York rose 
from 13,096 tons in 1896 to 30,272 tons in 1904. 

In the case of the European lines, we have often found it necessary 
to make use of our ability to ship goods to Europe via New York (to 
which I shall.hereafter refer) in order to overcome difficulties that 
arose from the fact that none of those lines were ready to furnish the 
service necessary to obtain and hold the traffic. The same difficulty 
would arise in the case of lines from the United States, and if this 
company’s line were abandoned there would be no way of meeting it. 

By its bills of lading and those which are issued for transportation 
over the railroad to points beyond, the company reserves the right of 
forwarding from Colon by such carrier as it should select. While 
the company has run its own steamship line from New York this pro¬ 
vision has been of great value. If freight bound to Europe was not 
properly and promptly taken care of by the European lines running 
to Colon, or if rates were not made which would enable this company 
to secure business profitable to it, the company has been in a position 
to forward the freight by its own line to New York, and thence to 
Europe, which has given'it control of the situation and enabled it to 


150 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


draw to the Isthmus much traffic which it would otherwise have lost. 
While it has very rarely been necessary for the company actually to 
take the step of forwarding the goods via New York, it has frequently 
had occasion to threaten to do so, and the possibility that it might 
take this course has always been sufficient to secure for the railroad 
from the trans-Atlantic lines such advantages in service and rates as 
were necessary to draw to it the freight desired. 

With the abandonment of the company’s own steamship line it 
would suffer, then, in two ways. It would lose all power of insuring 
prompt and efficient service by the trans-Atlantic lines and would be 
left without any adequate connection with New York, while it would 
be powerless to control such connection as it might be able to secure. 
The company’s experience has been ample to show that a great 
diminution in the business passing over the Isthmus would necessarily 
follow. The business between New York and San Francisco would, 
in my opinion, be nearly if not quite extinguished. Alwa}^s exposed 
to severe competition from the transcontinental lines, to which will 
shortly be added that by the Tehuantepec, Honduras, and Guatemala 
railroads, the Panama route can hold its business only by furnishing 
regular, prompt, and efficient service. Nor would it, in my opinion, 
be possible to obtain a connection on the Pacific if the line from New 
York to Colon were less efficient and regular than now. It has always 
been difficult to secure regular transportation between Panama and 
San Francisco, and if a carrier on that route can not reckon upon 
prompt and regular service between Colon and New York, it will be 
impossible probably to induce him to furnish satisfactory service for 
a business which is not in itself attractive under any circumstances, 
nor, if such connection could be obtained, would it be possible to 
secure the business. The bulk of the freight offering at San Fran¬ 
cisco for New York requires particularly prompt and regular dis¬ 
patch. Wine, for example, which is the most important single item 
m that business, suffers greatly from delay in transportation, and 
complaints are always made when such delay occurs in respect of it. 

In another way this power of forwarding the goods to Europe via 
New York has greatly affected the net results of the company’s 
operations. 

Mr. Shackleford. Would it interrupt you if I asked you a question 
right there? 

Mr. Drake. No, sir; not at all. 

Mr. Shackleford. Is there not a large amount of wine produced 
in California and shipped to Hamburg by way of the Straits of 
Magellen, by way of that Hamburg-American Line? 

Mr. Drake. Yes, sir; I believe there is a quantity carried by the 
Kosmos Line. You can get full statistics of the output of wine, 
ami- 

Mr. Shackleford. I just wanted to know, in a general way, 
whether it is not a fact- 

Mr. Drake. Yes, sir; it is. 

Mr. Shackleford. Whether there is not a large amount of wine 
going through the Straits of Magellan, instead of across the Isthmus? 

Mr. Drake. Yes, sir. A considerable quantity by the Kosmos 
Line, which operates jointly with the Hamburg-American Line. 

Mr. Shackleford. They are not allowed to ship across the Isthmus 
on the same terms as other lines? 




INVESTIGATION OF PANAMA RAILWAY COMPANY. 


151 


Mr. Drake. They have been offered the advantage, but have not 
availed themselves of it up to this time. (Reading:) 

It lias frequently been the ease that European lines running to Colon, seeking 
freight more profitable to themselves at various other ports of call, have left 
upon the Isthmus goods which they should have transported upon their own 
vessels, which have occupied the warehouses and cars of the company, at one 
time as many as 100 cars filled with goods which those vessels might have taken, 
being in the yards of the company at Colon. By the threat of transporting 
these goods to Europe via New York the company has always been able to 
compel the trans-Atlantic carriers to furnish adequate service, and thus has 
saved itself from the great expense which such an accumulation of freight 
involves. This advantage the company would of course lose if it abandoned its 
steamship line. 

• TRANSPORTATION OF GOODS FOR THE COMPANY. 

The net earnings and gross receipts of the steamship lines, as estimated 
above, do not really indicate the whole direct advantage which the •oinpany 
obtains from its ownership of the line. The very large amount of supplies and 
stores for itself and its employees, which the company is continually transport¬ 
ing from New York to Colon, has been carried upon its steamers at a rate very 
much lower than that at which other freight has been carried. This advantage 
would of course disappear with the abandonment of the line, and should be 
taken into account in estimating its effect upon the revenues of the company. In 
the year 1904, for example, there were transported by the steamship line 5,000 
tons of supplies for the laiJroad company and its employees, at a price of $5 per 
long ton, amounting to $25,000. It is impossible, exactly, to estimate what the 
-additional amount of freight would have been had this business been carried for 
outside shippers, the rates varying with the character of the goods, and goods 
not for the company being taken on a measurement basis when Ikai is more 
favorable to the ship. I think that, on a conservative estimate, this freight of 
$25,000 would have to be doubled in cost to the company if the goods were moved 
by an outside carrier. 

The loss to the company from the direct earnings of the steamship line, 
with the additional loss from higher rates on supplies, alone can not be estimated 
with accuracy. The sum of these, may be. I think, properly set at from $225,000 
to $250,000 per annum, but will be greater as business to the Isthmus increases. 

The loss in other ways will, in my opinion, be far greater in amount, but data 
arc lacking to estimate it properly, for nobody can say how much the railroad 
will suffer from the loss of all control over connecting carriers, and of all 
powers to maintain suitable connections with New York, which will follow the 
abandonment of the line. The San Francisco business will, I am quite clear, 
be wholly, or almost wholly, lost, and the earnings of the railroad alone from 
this business amounted in 1904 to $100,951 on west-bound business, and $67,293.62 
on east-bound business. Concerning the trans-Atlantic business it is impossi¬ 
ble to speak except generally. The increasing growth of traffic between Europe 
and the west coast, via the Straits of Magellan will render it easier for this 
trade to take another route, and it has been our experience that only our ability 
to control the situation through our steamship line has enabled us to keep this 
business in a satisfactory condition. It is to us very clear that to surrender 
the various advantages of this line would imperil the ability of the railroad to 
maintain itself and pay its fixed charges, which latter now, and will for the 
next twenty years, amount to $500,000 per annum. 

That is all I have to say on that first item. With respect to the 
second item, regarding the advisability of transferring the company’s 
general office to the Isthmus—I submit, that the respective terminals 
nf the company’s through line are New York and Panama, and it 
follows that the continuance of the company’s general office in New 
York, the commercial metropolis of the Western Hemisphere, is of 
paramount necessity. The progressive development of its tiaffic and 
revenue can justly be attributed to the location of headquarters in 
New York. As at present conducted, the company’s business re¬ 
quires and secures the faithful, intelligent, and uninterrupted services 
of every employee regularly attached to that office. 


152 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


The fiscal business of the company, which involves collection of 
gross earnings, the payment of expenses of every character, the 
redemption and cancellation of bonds, the payment of interest charges 
and dividends, the payment of freight balances to agencies of connect¬ 
ing lines, the drawing of bills of exchange, the settlement of claims 
for loss and damage to cargo and property, and the handling of gold 
and silver funds, together with the deposit and withdrawal of money 
with banks and trust companies, is conducted at the company’s New 
York office with greater precaution, security, and less expense than 
would result from the employment of outside agents. Under the 
direction and control of the executive officers of the company traffic 
agreements are formulated and carried out from New York and the 
resulting benefits in gross earnings from connection with twelve 
important steamship lines in this country and abroad collected and 
deposited in bank. 

The character and quantity of material and supplies required for 
the construction, maintenance, and operation of the company's rail¬ 
road and steamship lines is determined and proper measures taken to 
insure its purchasing and forwarding under the best possible condi¬ 
tions. 

The skilled labor required at the Isthmus is sought and engaged in 
New York under the most careful scrutiny as to character and 
ability, and the high character of the company’s present staff of 
employees attests the fact. 

The appointment of agents of every character—that is, special 
agents, hiring agents, traveling agents, and legal representatives— 
for the company at distant points is passed upon and settled in New 
York. 

The bonding of all the company’s subordinate officials who have 
the custody or handling of its finances is effected in New York. 

The insurance upon ship’s property and cargo at home and abroad 
belonging to or in care of the company is effected in New York. 

The charter of outside vessels to transport the company’s bulky 
material and supplies is effected in New York . • 

It is, besides, a most noteworthy fact that 50 per cent of the railroad 
company’s through traffic originates or terminates in New York, and 
the collection of 40 per cent of the total freight earnings of the com¬ 
pany and of its connecting lines is made there by this company and 
settlements effected with the resident agents, and at the risk of repeat¬ 
ing myself somewhat I beg you to note that the total gross earnings 
of the company per annum of almost three millions of dollars is made 
in New York, as is the disbursement of the total of two and one 
quarter millions of dollars of expenses and fixed charges, without the 
loss or misappropriation of one dollar. 

I think a careful review of the situation should convince the most 
earnest advocate of the change that it is inadvisable and against the 
best interests of the company, and that none of the business referred 
to could be performed as well (if it could be done at all) at the Isth¬ 
mus as in New York. 

From a traffic standpoint I submit that to close the New York office 
and transfer the management and operation of the railroad to the 
Isthmus and attempt to regulate the company’s traffic relations at that 
point would be equivalent to a complete surrender of the company’s 
control of its business into the hands of rival or competing interests. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


153' 


for however simple its accomplishment may appear, a slight study 
will prove its impracticability. With an aggregate traffic of 400,000 
tons carried to the Isthmus by 12 important steamship lines for 
transportation over the railroad in 1904, the handling of the attend¬ 
ant cargo papers, the verification of inserted weights, measurements, 
and rates, the certification to the treasurer of the moneys due to and bv 
the company, together with the correspondence and accounting inci¬ 
dent thereto, at present requires the service of a clerical force such as 
is now engaged in New York, trained and competent, faithfully and 
constantly employed, and not overpaid. 

Double the force would be required at the Isthmus and the work 
could not be as well and speedily accomplished, for climatic and sani¬ 
tary conditions there make necessar}^ the allowance of vacations of 
two months with leave of absence pay to Americans and Europeans 
engaged there in order to insure good clerical work, and the rates of 
pay to such employees are 25 to 50 per cent higher than in New York. 
Again, it is not to be expected that the traffic interests of the railroad 
would be as carefully safeguarded by any official whose chief purpose 
is to construct the canal, and whose tendency, therefore, would be to 
favor that work, as by officials especially employed to facilitate the 
safe and speedy transportation of cargo, and instructed to cooperate 
in every possible way with canal interests and work. 

Regarding the proposition that has been made to open the terminals 
of the company at both ends to all steamship lines on both oceans and 
establish a low transfer tariff over the railroad at uniform rates to all, 
1 submit that the attempt was made by the French Canal Company, 
which began by applying a uniform rate to all cargo that originated 
in Mexico and Central America, with the result that the earnings of 
the railroad were seriously reduced while rates previously established 
were not reduced by the connecting lines because the traffic would 
stand them, and those lines quarreled over the division of the reduc¬ 
tion of its proportion allowed by the railroad. Years of effort were 
required to restore the railroad company to its previous status as 
to division of rates after the attempt had been abandoned. There is 
no reason to suppose that a better outcome could be secured now. 

To conclude on this subject, I submit my opinion that only so long 
as any shares of the company’s stock was held by others than the 
United States Government will the necessity continue for the exist¬ 
ence of a board of directors with subcommittees and officials called 
for by the company’s articles of incorporation, as the company’s 
entire business can be conducted by a competent chief executive 
responsible to the owner (the United States Government) with sub¬ 
ordinates to head the several departments, as at present. 

Regarding the third item, viz, “ The advisability of continuing the 
present contract with the Pacific Mail Steamship Company, or of 
terminating it as now arranged, etc.,” I can not do better than submit 
a letter on the subject which was prepared after a most careful study 
of the company’s experience, which letter was unanimously approved 
by the company’s board of directors. Its conclusions are unanswer¬ 
able if the company’s policy is to be governed by a purpose to continue 
the development of its business on a profitable basis. 

Tbe questions now presented have two aspects: 

First, as to the business operation and practical results of the contract between 
this company and the Pacific Mail Steamship Company; and, second, as to the 
legality of the contract. 


154 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


(1) As to the Operation and Results. 

Tlie Panama Railroad Company is not merely a railroad corporation. Its 
charter powers extend to tlie operation of both a railroad and steamships. It 
is in the exercise of this express power that the corporation has from time to 
time, during the fifty years of its life, operated its own steamship lines on both 
sides of the Isthmus, in connection with the railroad, thus making a continuous 
line and service. 

Prior to 1872 the Panama Railroad Company had operated its own steamship . 
line between Panama and Central America and Mexico, but this proved unprof¬ 
itable. Traffic between Panama and San Francisco was carried on in connection 
with the Pacific Mail Steamship Company. 

In that year a contract was entered into with the Pacific Mail Steamship 
Company for interchange of business between Panama and San Francisco, and 
intermediate points in Central America and Mexico. This contract remained 
in force until 1876. 

In the latter year this company terminated the contract and established its 
own Pacific line between Panama and San Francisco, maintaining it until Feb¬ 
ruary, 1878. 

The result of operation of this Pacific line by the railroad company was very 
unsatisfactory and disadvantageous to it. It was found impossible to secure 
any other or more regular reliable cocarrier than the Pacific Mail Company. 

This led to the making, in 1878, of an exclusive contract with the Pacific Mail; 
a contract which continued until February, 1893. At that time this company 
demanded a more favorable division of rates, and the Pacific Mail refusing to 
accede thereto, the railroad company attempted to terminate the contract by 
declaring it at an end. The Pacific Mail insisted, however, that certain prior 
contracts with the railroad company entitled it to a continuance of the agree¬ 
ment so far as concerned the traffic to and from Central American and Mexican 
ports, and brought suit in the supreme court of the State of New York to estab¬ 
lish its contention. The court adjudged the contract in force and enjoined the 
railroad company from disregarding it. either by establishing its own line or by 
making other connections in contravention of it. 

During the period in which the rights of the railroad company and the Pacific 
Mail, in respect of Central American and Mexican traffic, were thus in litiga¬ 
tion, it became necessary to deal with the traffic between Panama and United 
States ports on the Pacific not affected by this controversy. 

At that time the merchants of the Pacific coast States considered that the 
transcontinental railroads were abusing their powers and exacting unreasonable 
rates; bitter hostilities existed between the transcontinental railroads and the 
shippers, and the Panama Railroad Company was besought by the merchants 
and shippers to cooperate with them in the establishment of a line of steamers 
running between San Francisco and Panama, to furnish competitive outlet for 
their traffic. The railroad company heartily supported the Pacific coast. Pub¬ 
lic meetings were held in California, and great interest was manifested in the 
press and commercial community respecting this measure, which resulted in the 
organization, by the merchants of San Francisco and the Pacific coast, of a cor¬ 
poration entitled the North American Navigation Company, with a cash capital 
of .$200,000, to itself operate a line of steamers in connection with the Panama 
Railroad Company, under an exclusive through-billing agreement. To encourage 
this competition with the transcontinental’railroads, and to foster its own bus¬ 
iness, the railroad company made an exceedingly favorable contract with the 
North American Navigation Company, exclusive and through billing, substan¬ 
tially of the same character as that now existing with the Pacific Mail. 

The operations of the North American Navigation Company, however, were 
disastrous, and resulted in a bankruptcy of that company in May, 1894, with a 
total loss of the investment of the merchant stockholders, and an indebtedness 
by it to this company for material and supplies which has never been liquidated. 

The financial loss inflicted upon the merchants of San Francisco in their desire 
to maintain an independent steamship line was very large, in addition to the 
capital invested, notwithstanding that there was not the slightest restriction 
placed upon the number of sailings their ships might make nor upon the quan¬ 
tity of cargo they might handle. 

The result of this operation was equally unfortunate to the railroad company, 
whose losses can be noted from the financial statement which we will presently 
:.set forth. 


155 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


donn^n/i'f th» UW °V K ' U 1 *!’ American Navigation Company and the aban- 
S t 6 1>a( ' lflc coast n.ercliants, the Panama Railroad 

bur it a'lie-ivv i 6Cl i 1 ” , ta -* e U P !l "'' carr - v °“ tlle llli0 " ith chartered vessels, 
sniri/ ‘ n to‘\ ee "t h !i h ’* elld , ured until December, 1«G, largely from a public 
witl the ,1s ; merchants who had lost so heavily In their contest 
men t n-V , tra ?f eoa tmental railroads. In December. 1805, an adjust- 

wliich had w C 6(1 v Ul1 tU ? PdCiflc Mail concerning the legal controversies 
as the one now Shif * Uew C0DtraCt was n,ade ’ substantially the same 

to hotl/parties th ' S COr,tl ‘ act was five - veal ' s - it proved reasonably profitable 

At its expiration in 1900, a demand for what is called the “open-door policy” 
at r anama arose at the instance of two foreign lines who were already cocarriers 
vith the company m other traffic. It was these lines which contended that by 
ie concession from Colombia the company was bound to accord equal privileges 
to all responsible lines. 


After prolonged consideration the Panama Railroad Company determined to 
gn e the open-door ” plan a trial, and it publicly announced the adoption of that 
po icy. All lines (including the Pacific Mail) were accordingly invited to partici¬ 
pate. ihe Pacific Mail declined to participate or make any contract upon that 
basis. As a result all relations between that company and this corporation were 
again severed. 

The two foreign companies (at whose urgent demand the policy had been 
adopted ) having only vessels of foreign registry, and refusing to charter or 
construct those of American registry, were unable to extend'their service, as far 
as traffic with this company was concerned, beyond Mexican ports. This com¬ 
pany made every possible effort, hut without success, to secure other lines of 
American registry to take up and operate a line between San Francisco and 
Panama. Efforts also to arouse interest in tlie Pacific coast merchants to again 
establish such a line met with no satisfactory response, although this company 
offered to give them exclusive control of business to and from San Francisco and 
United States ports beyond, and equal participation as well in the Central Ameri¬ 
can and Mexican business, which, by the compromise agreement with the Pacific 
Mail, this company had again become possessed of. 

Again this company was compelled in self-defense to open and operate a 
line of its own between San Francisco and Panama in connection with its Atlan¬ 
tic line and Isthmian railroad. As in every previous instance, the operation of 
that line proved a heavy loss to this company. 

At this juncture the situation of the Panama Railroad Company was most 
unfortunate. The San Francisco-Panama line was operating at a heavy loss, 
as were also the said two foreign lines running to Central America and Mexico. 
The service of these foreign lines was irregular and inefficient, and perhaps un¬ 
avoidably so; the patronage of the Panama route was being diverted to other 
channels, and the good will and business of the Panama route was being ruined. 


Mr. Townsend. How do you figure out that you could operate a 
line of steamships on the Atlantic successfully, but can not do it on 
the other side? 

Mr. Drake. Because of the long haul and because there is not 
business enough on the route for more than one steamship line. That 
is the crux of the situation. There is just enough business for one 
well-managed steamship line, provided it has both the foreign and 
domestic business in connection with the Panama Railroad Company, 
on the Pacific. If that door is opened and open competition results, 
the consequence is inevitable. 

Mr. Shackleford. Why could you not, by making a proper rate, 
capture of that traffic that I spoke of that goes through the Straits of 
Magellan ? 

Mr. Drake. That is comparatively small and does not amount to 
enough to make any appreciable difference. Almost all of that is 
moved by the Southern Pacific and our line. Considerable of it is 
brought around to New York by sailing vessels that have arrived at 
San Francisco with coa] and are looking for a cargo back, and there 


INVESTIGATION OF PANAMA KAIL WAY COMPANY. 


156 

is one large shipper there who habitually charters vessels, when he 
can do so advantageously, and loads the vessel there for New \ ork. 

Mr. Shackleford. I speak of that which comes by the Hamburg 
line around bv the Straits of Magellen. 

Mr. Drake. That amount is very small, and it would not make an 
appreciable difference. 

Mr. Mann. Do you explain in your paper there why you could not 
operate a steamship line profitably on the Pacific coast, with the 
Panama Railroad, while the Pacific Mail Company could continue to 
operate without the railroad? 

Mr. Drake. No, sir: 1 could not explain that. I could not justify 
it. I think 1 make it plain here that losses would inevitably result. 
The distance is 3,500 miles from San Francisco to Panama. The 
Pacific Mail has established stations all along that littoral, and can 
handle the business to the disadvantage of any competing line. We 
would have to go to the expense of developing just such agencies, and 
the result of competition there must be disastrous. The operation of 
a steamship line is different from the operation of a railroad. The 
competition is unlimited, and the result is, almost inevitably, the sur¬ 
vival of the fittest ; and unfortunately the foreign lines at this time 
operated are the fittest to survive. 

Mr. Mann. Have the Pacific Mail Steamship Company refused to 
carry freight through your company? 

Mr. Drake. I said they had. 

Mr. Mann. I say at those periods, if they had refused to carry 
freight, and thereby run at a loss, how long do you think they would 
be able to continue that ? 

Mr. Drake. That I can not sav. 

Mr. M ann. Would that be controlled by the fact that they could 
afford to run the Pacific Mail at a loss in order to keep the freight 
rate up for the Southern Pacific and Union Pacific Railways? 

Mr. Drake. I can imagine that if the connection with the railroad 
line were entirely severed that line would be run for the interport 
trade, in order to operate a certain tonnage which they have now 
which is not fit now for anything else. 

Mr. Mann. You say that it would be in competition with foreign 
lines? 

Mr. Drake. I think so. 

Mr. Mann. Then the only line which is now operated so as to carry 
freight to San Francisco by means of the Panama Railroad Company 
could be continued in order to collect the higher freight rates that 
would result to the transcontinental roads ? 

Mr. Drake. I think I make that plain. There is nothing they 
would like better. You understand, they did not go into that con¬ 
tract with us out of regard for us. They went into it so as to operate 
that line on the coast and secure and continue the business they had 
with foreign points, via the Isthmus. (Reading:) 

Experience had proven that there was not business enough for more than one 
line and that no steamship company could afford to operate with American ves¬ 
sels on the long route between San Francisco and Panama unless having an 
exclusive agreement in the carrying of cargo to and from both domestic and for¬ 
eign ports in that territory in connection with the Isthmus route. 

So ruinous and so incontrovertible were these conditions, that the two foreign 
lines who had urged the “ open-door ” policy were forced to recognize that they 
themselves could not profitably continue operations under that policy. Accord- 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


157 


ingly this company, now firmly convinced of the wisdom of its previous policy, 
renewed negotiations with the Pacific Mail Steamship Company, and concluded 
with it the contract of June. 1902. 1’he said two foreign companies withdrew 
trom the Central American and Mexican traffic, which had proved so unprofit¬ 
able to them and so disappointing to this company. 

The contract with the Pacific Mail has continued in satisfactory operation to 
the present time. Under it the sailings have been regular, the service reliable, 
and the good will of the Panama route has become reestablished. Under its 
provisions the Panama Railroad Company secures more than 50 per cent of the 
through rates and the operations have proved profitable. 

The results of these successive policies of operating under an exclusive con¬ 
tract with the Pacific Mail or without it are conclusively reflected by the net 
earnings. These results are as follows and speak for themselves: 



Year. 

Loss. 

Profit. 

When operating with the Pacific Mail.. .. 

1891 


$828,800 

182,816 

Do....... 

1892 


No contract with Pacific Mail; period of North American Naviga¬ 
tion Co. operation_ . 

189)3 

S288 099 

North American Navigation Co. abandoned service; continued by 
Panama Railroad; no contract with Pacific Mail___ 

1891 f 

80,776 


Panama Railroad operating line; no contract with Pacific Mail_ 

1895 

62,943 

Contract with Pacific Mail_ ... __ 

1896 


545 684 

Do__________ 

1897 


409,873 
266 746 

Do.._______ 

1898 


Do........ 

1899 


295.231 

Do........... 

1900 


446 764 

South Pacific carriers (two foreign lines) operating north of Panama; 
no contract with Pacific Mail: earnings reduced__ 

1901 


259,590 

285,384 

401,068 

311,000 

Same conditions as 1901 for first six months and thereafter; contract 
with Pacific Mail.. ....... 

1902 


Contract with Pacific Mail_____ 

1908 


First six months; contract with Pacific Mail (six months only). 

1904 





Our business between Panama and San Francisco and intermediate points 
is 53 per cent of the total business of the Panama Railroad Company, on the 
basis of last year's traffic, and it is this (the bulk of the company's business) 
that is involved in tlie contract with the Pacific Mail, and from which fully 
50 per cent of the annual net profits of the company are derived. 

The transcontinental railroads naturally seek to monopolize the business of 
the Pacific coast, and the history of their dealings with this subject is notorious. 
Unless the Isthmus route is maintained as a competitor to them, the whole 
Pacific coast again comes under the thraldom of the transcontinental railroads. 

Mr. Shackleford. Let me interrupt you there. Does not the 
Pacific Mail belong to some of the transcontinental lines? 

Mr. Drake. It belongs to the Union Pacific through its owner¬ 
ship of the Southern Pacific. They control it. They own a little 
more than a majority of the stock. 

Mr. Shackleford. It is under their control ? 

Mr. Drake. Yes, sir [reading]. 

The only escape of the Pacific States from their monopoly lies in the main¬ 
tenance of a competitive route via the Isthmus. 

To afford the Pacific coast this outlet, the Panama Railroad Company 
maintains rates from 20 to 30 per cent less than the transcontinental railroads, 
and also competes with the American-Hawaiian Steamship Company, which 
operates via Magellan. 

It will readily be seen that nothing would afford the transcontinental railroads 
greater satisfaction than to witness this company forced out of competition with 
them, through the abrogation of the Pacific Mail contract, by which a regular, 
efficient, and satisfactory service with American vessels is maintained between 
San Francisco and Panama and intermediate points, and thus be compelled to 
depend upon uncertain operation of new and so-called “ independent lines,” lack¬ 
ing in experience, suitable vessels, capital, and business. 

If, therefore, the company terminates the Pacific Mail contract, it must be 
prepared to resume operations itself, or to accord exclusive through billing 
privileges to some other single line, since on that basis only can any line be 









































158 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


maintained under existing conditions of traffic. To withdraw from the busi¬ 
ness is to surrender the Pacific coast to the tender mercies of the transconinental 
railroads, and to render an inefficient and uncertain service is likewise to play 
into their hands. 

The consequence of either policy would be a serious loss to the railroad com¬ 
pany, independent of its effect on the public. 

There is not one .iot of evidence that any individual or group of individuals 
in any part of the United States is prepared to establish a steamship line to 
replace the Pacific Mail service between San Francisco and Panama, and there 
is not a scintilla of proof that there is at present business enough for more than 
one line. There would be nothing gained, so far as this company is concerned, 
in the mere substitution of one line for another; and experience has demon¬ 
strated that there is not yet enough business to maintain more than one line. 

Bearing on the difficulty of securing the establishment of any new line, we 
need hardly remind you that the San Franeisco-Panama line, as far as through 
traffic with the Panama Railroad is concerned, can only be maintained by vessels 
of American registry, because of the regulations of the United States Govern¬ 
ment regarding the carriage of cargo between United States ports. Sufficient 
business can not be secured with which to profitably maintain a steamship line 
catering exclusively to this long-haul San Francisco traffic; and if a line is 
deprived (by competition with vessels of foreign registry) of the profit on the 
short-haul Central American and Mexican business, the consequent loss will 
sooner or later force it to withdraw altogether. In other words, our experience 
for the past thirty years proves that there is not sufficient business to sustain 
a long-haul service from San Francisco unless the profitable short-haul business 
with Central America and Mexico can also be secured by the same line. 

Another equally practical phase of the subject invites consideration, namely; 
The directors of the company have authorized the construction of two, if not 
three, additional steamers for the Atlantic service, and bids are about to be 
invited. The Pacific coast business in 1903 was 41 per cent of the total tonnage 
of the company’s Atlantic steamship line, and the construction of these steamers 
is justified by that fact. But if the Pacific Mail contract is now terminated, and 
the Pacific coast business lost or demoralized, there is no necessity for the con¬ 
struction at this time of additional vessels. Moreover, in that event the com¬ 
pany’s ability to pay for them would be seriously jeopardized by the consequent 
loss of business. 

It may be well to note that after years of effort arrangements have been 
established, not only with the Pacific Mail, but with 10 connecting steamship 
lines on the Atlantic Ocean, as well as with connecting steamship lines on the 
Pacific Ocean, by which uniform classifications of cargo, and relatively uniform 
bills of lading, have been adopted. 

In view, therefore, of the fact, which has become demonstrated, that there is 
not at this time enough business for more than one Pacific line; that in order 
to secure a profitable and reliable connection, exclusive through billing arrange¬ 
ments must be made with a single Pacific Line; the losses which have invaria¬ 
bly transpired when the company has operated its own Pacific line the failure 
of independent lines to maintain the service; the profitableness to this company 
of the present contract upon which more than half of the net earnings and 
dividends of the company depend; that if the Pacific Mail contract be now 
terminated no other equally satisfactory connection is practicable, and that if 
such contract be now terminated the company will be compelled either to itself 
maintain the line at a loss, as heretofore, or else abandon the line and thus 
deprive the Pacific coast of competition with the transcontinental lines ; the 
board of directors of the company consider that it is not to the interest of the 
corporation to terminate the existing contract with the Pacific Mail Steamship 
Company before it is prepared to itself operate the line or is assured equally 
profitable, efficient, and satisfactory traffic connections. 

We now turn to the second aspect of the subject—the legality of the contract. 

We consider the contract entirely legal and enforceable. The decision of the 
supreme court at Bogota did not at all concern the validity of the contract 
between this company and the Pacific Mail; it concerned only the interpretation 
of the concession granted by Colombia to the Panama Railroad Company. It 
was contended that the railroad company was bound by the terms of that con¬ 
cession to grant through-billing provisions equally to all cocarriers. The deci¬ 
sion did not deal with this point directly, and only held that rates over the rail¬ 
road (but not over the steamship line) must be the same to all persons, whether 
they were proportions of through rates or were fixed by the company’s regular 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


159 


tariff. We feel justified, however, in referring to the state of affairs in Colombia 
at the time the decision was rendered and to the bitter hostility then manifested 
by the authorities and people of that nation toward the United States and the 
canal and railroad companies. This company paid no regard to the decision, 
which it considered unsound and unwarranted. The Colombian courts nor even 
the complainants never sought to enforce it or carry it out; but, at any rate, it 
related to the interpretation of the concession, and did not concern the validity 
of the Pacific Mail contract. 

The present Pacific Mail contract, with similar ones made by the company, have 
been in operation for two generations, and no one has ever contested their valid¬ 
ity in any court of law or equity, even under the most intense competition of the 
transcontinental lines, and even under the disappointment of other carriers 
demanding similar privileges from us. On the contrary, the supreme court of 
New York, in the case mentioned in this letter, recognized the validity of the 
contract by decreeing that the company must continue it, and by enjoining the 
company against violating it. 

P>ut it may aid you if we still further enlarge upon this point: 

The Panama Railroad Company was created by special charter granted by 
the legislature of the State of New York, April 7, 1841), with plenary powers 
for the construction and operation of a railroad across the Isthmus of Panama, 
and of steamship lines in connection therewith. 

The company accordingly established, and has maintained, a continuous single 
route between New York and San Francisco and intermediate points, made up 
by the Atlantic line, between New York and Colon; the railroad line, between 
Colon and Panama; and the Pacific line, between Panama and San Francisco. 
It is a single line, performing a continuous service between the eastern and 
western coasts of the United States. No part of this line is parallel with the 
other ; no part is competitive with the other. No one can question the right of the 
company to itself own and operate such line; and we are not aware of any prin¬ 
ciple of law or public policy which prohibits the railroad company from carry¬ 
ing out by contract with others that which it may lawfully do itself. Nor is 
there any principle of public policy which prohibits, either within or without the 
United States, two transportation lines, neither parallel nor competing, which 
connect and form a continuous line, from entering into a contract for the inter¬ 
change of traffic and division of rates, or or making such contract exclusive as 
to each other. 

Mr. Mann. Do you know of any such contract in this country on 
any railroad ? Have you ever heard of any such contract? 

Mr. Drake. Xo, sir; I do not recall one for the moment. That 
is what I claim for the Panama business—that it is unique; that it 
is different from any other business in the world. 

Mr. Mann. That*is the reason I asked you if you knew of any such 
contract in the United States. 

Mr. Dr are (reading). “ Such agreements are common in the United 
States, as in other countries.” I cfo not recall any, rfs I say, sir. 

Mr. Mann. There are none such in existence. 

Mr. Drake (reading). 

Such agreements are common in the United States, as in other countries. It 
has been even held that under the interstate-commerce law a company which 
has made a special agreement for through billing and joint rates with a connect¬ 
ing company can not be compelled to make a similar agreement with other con¬ 
necting carriers and does not violate the law by making such an exclusive 

agreement. * 

^If there be any principle of public policy involved, it would seem rather that 

it should be invoked to support the Panama route and the existing contracts, 
for the Panama Railroad furnished to an important section of the United States 
the only protection which competition can give it against transcontinental rail 
roads The Panama Railroad competes with the strongest monopoly in the 
transportation world. Should such protection and competition be withdrawn, 
or be impaired by spasmodic, unreliable, uncertain service, no greater misfortune 
could occur to the Pacific coast. 

That covers the expression of my opinion on those three topics. 
Now.'in connection with this subject, I would like to lay before you 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


160 

the formal notice of termination of the contract with the Pacific 
Mail Steamship Company, which was served on that company on 
January 12-13, 1004. 

The document referred to is here inserted in the record as follows: 

January 12, 11)05. 

The Pacific Mail Steamship Company, New York. 

Gentlemen : Whereas by article 21 of the traffic agreement entered into 
between the Panama Railroad Company and the Pacific Mail Steamship Com¬ 
pany, dated June 11, 1902, the duration of said traffic agreement is made subject 
to the provisions of a contemporaneous agreement between said parties thereto 
of even date therewith : and 

Whereas by article 4 of said contemporaneous agreement known as “the 
supplemental contract.’’ it is provided and agreed “ that if at any time during 
the continuance of said traffic agreement a majority of the shares of t;be rail¬ 
road company or its railroad property shall be purchased or acquired by the 
United States of America, or by any person or persons representing it, or acting 
in its behalf, then either party hereto may give notice in writing to the other 
of its intention to terminate said traffic agreement, and at the expiration of six 
months from the giving of such notice the said traffic agreement, and the previ¬ 
ous articles of this agreement shall terminate, come to an end, and be utterly 
null and void thenceforth, anything in said traffic agreement or herein con¬ 
tained tp the contrary notwithstanding; ” and 

Whereas a majority of the shares of the said Panama Railroad Company has 
been purchased by the United States of America, and 

Whereas at a meeting of the board of directors of the Panama Railroad 
Company duly called and held on this 12th day of January, 1905, the notice and 
action herein contained were duly authorized to be given and taken: 

Now, therefore, the Panama Railroad Company hereby gives notice to you, the 
Pacific Mail Steamship Company, of its intention to terminate said traffic agree¬ 
ment, and that at the expiration of six months from the giving of this notice, 
the said traffic agreement, and articles first, second and third of said supple¬ 
mental agreement will terminate, come to an end, and be utterly null and void, 
anything in either of said agreements contained to the contrary notwithstanding. 

Dated New York, January 12, 1905. 

Panama Railroad Company. 

By J. Edward Simmons, President. 

Attest: E. A. Drake, Secretary. 

Mr. Mann. If the Pacific coast trade will support but one steam¬ 
ship line and the Pacific Mail Line has practical control of the trade, 
or at least the best chance to control the trade, why is it that the 
Pacific Mail Line is so afraid of competition that it refuses to do 
business with you unless it has an exclusive contract? 

Mr. Drake. Because that business is conducted on such a narrow 
margin of profit. There is so little earning. 

Mr. Mann. Why could they not still keep everybody else out if 
there was only one line there? What are they afraid of, tramp 
steamers? 

Mr. Drake. No, sir: regular lines connecting at Panama with our 
i oad. 

Mr. Mann. Nobody could anticipate what tramp steamers might 
do. 

Mr. Drake. They are afraid of what might be possible if the door 
were thrown open. If the door were opened to another line, the busi¬ 
ness would be divided and there would be a loss to both of them. 

Mr. Mann. And then the other line would not continue in business, 
would it? 

Mr. Drake. That is exactly the contingency that I have suggested. 

Mr. Mann. What makes you think that another line would start 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


161 


in business when they knew in advance that there was only business 
enough for one line? 

Mr. Drake. I know there are several deluded parties who are heard 
from frequently on that subject who have stated that they would enter 
the coastwise and foreign business if they could secure connection at 
Panama. I do not believe it to be true. Even if they entered into 
competition, as they would be obliged to, with the Pacific Mail Steam¬ 
ship Company in foreign traffic alone on the coast and secured the 
coastwise traffic to the exclusion of the Pacific Mail Steamship Com¬ 
pany it would result in loss to both, and it would result in the ultimate 
withdrawal of the new line and the consolidation of the Pacific Mail’s 
control. We claim that we have secured the full benefit of connec¬ 
tion with the Pacific Mail Steamship Company. 

Mr. Mann. What would be the probable annual expense of oper¬ 
ating such a line of steamers as is operated by the Pacific Mail Com¬ 
pany now ? 

Mr. Drake. I can not tell you, because eight or ten vessels are now 
operated by the Pacific Mail Steamship Company, and the result 
would be very materially affected if high-grade, modern-built ships 
were employed that could be operated regularly and speedily, and by 
reason of their capacity, at a low cost. 

Mr. Mann. We believe that you are thoroughly sincere about this 
matter, Mr. Drake, and that you believe that the Panama Railroad 
Company is not controlled by the transcontinental railroads. I want 
to ask you this question: In your judgment, is the refusal of the 
Pacific Mail Steamship Line to deal with you when they have not an 
exclusive contract actuated by their fear of ocean competition or fear 
of competition with the transcontinental railroads? 

Mr. Drake. I think it is actuated entirely by their thorough famil¬ 
iarity with the fact that if they do not have an exclusive contract with 
us they can not maintain the line except at a loss. They lost $375,000 
as a result of competition in the first year after severance of their 
connection with us. 

Mr. Mann. Do you think that refusal is actuated by fear or by the 
fact that the control of the steamship line is held by the Southern 
Pacific Railroad and the Union Pacific Railroad ? 

Mr. Drake. If it is really because of such control, I have no knowl¬ 
edge of it; nor do I believe it to be for other reason than a determina¬ 
tion not to repeat their previous experiences. 

Mr. Mann. Do you think that fear is increased at all by that fact? 

Mr. Drake. No, sir. 

Mr. Mann. Do you think that the fact that the steamship line is 
controlled by the transcontinental railroads has nothing to do with the 
refusal of the Pacific Mail Line to handle freight in connection with 
you unless they have an exclusive contract ? 

Mr. Drake. I think I can properly answer that question by repeat¬ 
ing the utterances made by the officials of that company to the effect 
that they will not operate'that line at an assured loss; that they will 
not lose any more money by operating that line in competition with 
other lines. 

Mr. Mann. Their own statements and conduct would indicate that 
they were not anxious to operate it unless they had an exclusive 
contract. 


PAN RY— 05-11 


162 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

Mr. Drake. They absolutely decline it, and give what appears to 
us to be a good reason. They severed the connection. They have 
discontinued it in the past. 

Mr. Mann. Do you have rate sheets? 

Mr. Drake. Yes, sir; we have the traffic manager here. 

Mr. Mann. Are those rate sheets published? 

Mr. Drake. Yes, sir; they are published. 

Mr. Mann. In what form? 

Mr. Drake. I am familiar with them, of course. They are pub¬ 
lished in the form of printed tariffs covering all the sections of our 
route. 

Mr. Mann. Can we have some of those ? 

Mr. Drake. Yes, sir; every tariff we issue can be duplicated. 

Mr. Mann. And you have classifications? 

Mr. Drake. Yes, sir; I stated that we fortunately had arrived at 
an understanding with all of our connecting lines and have estab¬ 
lished uniform classifications, respectively, for points south of Pan¬ 
ama and for points north of Panama. That is a large step forward 
in commerce, whether we continue in it or not. 

Mr. Mann. Will you furnish us copies of those? 

Mr. Drake. Yes, sir. 

Mr. Mann. I wish you would. 

Mr. Drake. Yes, sir. 

Mr. Stevens. Do you understand that there will be much increase 
of traffic from the Pacific coast to the Isthmus by reason of the con¬ 
struction of the canal ? 

Mr. Drake. It is anticipated that there will be some increase, but 
not in the shape of products. 

Mr. Stevens. It will be mostly in lumber, and things like that, 
needed for the construction of the canal ? 

Mr. Drake. Yes, sir. 

Mr. Stevens. Is there not always a constant increase of traffic from 
the Mexican ports up and down the Pacific coast? 

Mr. Drake. No, sir; there is a slight increase, but the ports are few 
and the coast is inaccessible. I might account for that by saying that 
the entire Pacific coast littoral now supports but 5 million people, 
and while it may be capable of supporting 100 million people its de¬ 
velopment is very slow. 

Mr. Stevens. Are thre not now two or three lines of railroads in 
Mexico which are now seeking the Mexican Pacific ports? 

Mr. Drake. It is quite true that there is one, the Tehuantepec 
road, which is creating ports ? 

Mr. Stevens. Yes; then there is the Mexican Central and the Mexi¬ 
can National, and that makes three lines? 

Mr. Drake. Yes, sir. 

Mr. Stevens. Will that not make considerable increase of traffic to 
the Mexican ports ? 

Mr. Drake. It should; yes, sir; that is for the railroads. 

Mr. Stevens. Do not the railroads bring traffic to ports that seek 
water transportation ? 

Mr. Drake. It is a general fact that the increase of facilities results 
in an increase of business. 

Mr. Stevens. It always works that way. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 163 

Mr. Drake. Yes, sir; but there is a difference in this case. The 
coast is a very inaccessible one, and the handling of traffic is done 
through ports that are accessible. Traffic will travel up and down 
the interior to get to ports where it can be handled most readily. 

Mr. Stevens. Is it not true that there will be an increase of traffic 
that must seek the water from Mexican ports ? 

Mr. Drake. Yes, sir; I think so, in years. 

Mr. Stevens. Now, from the increased traffic from these various 
causes, will there not be some steamship line or lines operated between 
the Pacific ports and the Isthmus? 

Mr. Drake. I should think so, naturally. But I would like to say 
to you that I think that will not come about during the period of the 
canal construction. I do not think it will result during the next 
five or six years. 

Mr. Stevens. You think, then, that if the Pacific Mail ceased to 
operate its steamers there would be no steamship line there? 

Mr. Drake. I do not think that. There are two foreign lines that 
are operating in connection with us to and from south of Panama, 
and they have again offered to extend their service. 

Mr. Stevens. There will be some steamship carriers? 

Mr. Drake. Yes, sir. They would simply extend their itinerary 
up the coast, whether it was profitable or not. 

Mr. Stevens. If there be some steamship connection with the 
Pacific ports and Panama, so that it is possible to have some through 
bill of lading or coastwise business, does not that- 

Mr. Drake. The foreign lines could not through-bill in the u coast¬ 
wise ” traffic, but could do so in traffic to and from Mexican and 
Central American points, as they are now doing south of Panama in 
connection with us. 

Mr. Stevens. Well, would there not be connections which would 
give a through bill of lading to American lines for coastwise business ? 

Mr. Drake. I do not think there would be any American line that 
would enter that traffic alone, because the rates obtainable would be 
unremunerative. That was the reason why the operation of just 
such a line was disastrous for us and to North American Navigation 
Company, and there is no reason for any company to expect a profit 
from the rate that would be obtainable between San Francisco to 
Panama. 

Mr. Stevens. That is what 1 was trying to get at. Has not the 
course of business somewhat changed by reason of the construction 
of the canal, and by reason of the construction of these additional 
railroad lines in Mexico ? 

Mr. Drake. Not yet. None of them of have been realized. It is 
all prospective. 

Mr. Stevens. Yes; but the canal will be constructed, and those rail¬ 
roads are being constructed, and large amounts of material must be 
moved. 

Mr. Drake. But the railroads have been in process of construction 
for years. They are approaching completion. There are serious dif¬ 
ficulties in the way of actual completion of those roads, and none of 
those difficulties have been effectually reduced. 

Mr. Esch. The Tehauntepec road is national ? 

Mr. Drake. The Panama Railroad Company need have no appre¬ 
hension of that competition except and unless the Panama route be 



164 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

throttled and closed, because the Tehuantepec road is a line with 
heavy grades and it is 173 miles long. Prominent foreign contract¬ 
ors have a contract with the Mexican Government to complete the 
terminals, and they have had it for years. Twice within the last ten 
years the railroad has been reironed with light rails, and they have 
attempted occasionally to transport some through cargo, and we have 
heard of it, and that is the last that we have heard of it. It is a 
national enterprise. I am not trying to belittle it. It could only be 
stimulated into life in case the Panama Railroad was throttled; that 
is, the railroad might be devoted entirely to the construction of the 
canal. Let me express one thought here. That railroad was laid out 
and built by American brains, skill, and capital (I see here one of the 
gentlemen who Avas connected /with that period), and it has been 
operated for fifty years, and this Government has assumed a serious 
obligation to the Pacific littoral to preserve the channel which has 
developed commerce from 50,000 tons in the beginning to 400,000 
tons to-day. The canal itself is to be built to develop and provide 
for increased traffic, and the chief danger to existing commercial and 
maritime interests using the Isthmus route is that the present active 
operation of that route will be subordinated to the necessities of 
canal construction. There is no necessity for that. Under the French 
canal construction period the commercial business of the company 
was conducted successfully, in addition to the work for the canal 
company, which was done under a more favorable contract for the 
railroad than the railroad now has with the Canal Commission. 

Mr. Stevens. The business of constructing the canal was not very 
profitable during that time ? 

Mr. Drake. That is why this Government came into possesion 
of it. 

Mr. Stevens. Is the Tehuantepec railroad to be in connection with 
Panama ? 

Mr. Drake. I do not think it is. It has two terminals on the Gulf, 
one at Salina Cruz, where the}' have sunk great blocks of stone to 
create a breakwater and to make a lagoon in which vessels may 
anchor, but by a violent storm lately the foundations of their works 
have been utterly destroyed. At Coatzacoalcos, on the Gulf side, 
they are going 18 miles up the river to establish a large interior ter¬ 
minal, and they expect to complete the line. But the terms of the 
contract which the contractors have with the Government entail the 
payment to the Mexican Government of 5 per cent on the gross re¬ 
ceipts, and the period of the payment on gross receipts has disap¬ 
peared so far that the lack of profit is determined in advance. 

Mr. Esch. This notice was given to the Pacific Mail Company on 
the 12th of July ? 

Mr. Drake. Yes, sir. 

Mr. Esch. And is in force on the 12th of July of this year? 

Mr. Drake. Yes, sir. 

Mr. Esch. In the report which you have filed here as to the fees 
of the directors of the Panama Railroad Company I notice an itemized 
account of Mr. Grunsky’s fees. Commissioner Grunsky filed with the 
chairman of the committee last Saturday a letter, of which I will read 
the first paragraph. The letter is dated February 18, 1905, and is 
written, calling attention to another letter which is addressed to you 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


165 


as secretary of the board of directors, under date of December 13, 
1904. The first paragraph of that letter is as follows: 

Inclosed 1 I hand you, unopened, an envelope which was handed to me at the 
close of the first and only directors* meeting, July 26, which I have attended. It 
contains, I suppose, the attendance fee to which the directors are entitled under 
the company’s by-laws. I did not insist upon declining this fee at the time it 
was handed me in order to avoid possible embarrassment of my associates, 
and because I desired to read again the President’s letter which makes our 
services on the board of directors a part of our official duties, for which we are 
otherwise compensated. I can not construe the attendance fee other than 
compensation, and therefore must decline to accept any such fee for attendance 
at meetings, etc. 


Did you receive such a letter ? 

Mr. Drake. Yes, sir. 

Mr. Esch. Did Mr. Grunsky return the first payment of $25 ? 

Mr. Drake. He did. 

Mr. Esch. Your account seems to indicate that that was the 
payment for the meeting of July 26 last? 

Mr. Drake. Yes, sir. 

Mr. Esch. Your account shows that he received in all payments 
for 10 meetings of the board of directors, making a total of $250? 

Mr. Drake. Yes, sir. 

Mr. Esch. Were all payments subsequent to Julv 26 returned by 
him? 

Mr. Drake. No, sir. 

Mr. Esch. Did he receive and has he retained the payment of $25 
made July 26 ? 

Mr. Drake. Yes, sir. Let me say in explanation of that that the 
envelope which he returned was retained bv the treasurer and subse¬ 
quently handed back to him. 

Mr. Esch. And retained by him? 

Mr. Drake. Yes, sir. 

Mr. Esch. Has he received and retained the nine subsequent pay¬ 


ments ? 

Mr. Drake. Yes, sir. 

Mr. Esch. Including the payment for the meeting of February 18, 
last? 

Mr. Drake. He has retained them. There is an itemized statement 
of each director there. 

Mr. Esch. Yes. 

Mr. Townsend. Nov^, you spoke of the fact that the directors had 
received pay. I w T ant to ask you if Frank Hecker ever received any 
money as a director of the Panama Railroad Company ? 

Mr. Drake. No, sir; he never attended a meeting. 

Mr. Tov t nsend. Did General Davis ? 

Mr. Drake. No, sir. He never attended a meeting. He received 
notice of his election while he was on the Isthmus. 

Mr. Shackleford. Neither of them ever attended any meeting? 

Mr. Drake. No, sir. ^ . _ . 

Mr. Wanger. Has he been in the United States since he became a 

director ? 

Mr. Drake. Yes, sir. __ , , « 

Mr. Mann. Who was elected to succeed Mr. Hecker on the board ? 
Mr. Drake. Nobody. There is a vacancy. 


166 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

Mr. Manx. Have you produced here the minutes of these meetings? 

Mr. Drake. Yes, sir. I produce the original minute books of the 
board of directors and of the executive committee for several years 
back, and present them for such examination as may be desired. 

Mr. Stevens. Are they a part of the record ? 

Mr. Townsend. They are here to be examined, and any part of 
them that you desire will be put in the record. 

Mr. Stevens. I desire to examine them. 

Mr. Mann. I desire to examine them. 

Mr. Shackleford. Where do you get the coal that you have been 
bu}dng for the Panama Railroad Company ? 

Mr. Drake. We buy it in New York. 

Mr. Shackleford. Where do you buy it ? 

Mr. Drake. From Castner, Curran & Bullitt. 

Mr. Shackleford. Has the Panama Railroad Company been sup¬ 
plying the Commission with the coal that they have used on the 
Isthmus ? 

Mr. Drake. Yes, sir. 

Mr. Shackleford. What sort of an arrangement was made with 
them ? 

Mr. Drake. The arrangement with them at first was that they were 
to be supplied at the same rate at which we had theretofore sold to 
the United States Government. That has been a declining price, 
until now we are supplying coal at $5 per ton at Colon and at $6 per 
ton along the line of road. 

Mr. Shackleford. Along the line of the road? 

Mr. Drake. Yes, sir. That price little more than covers the cost. 

Mr. Shackleford. Has the Commission at any time advertised for 
bids for furnishing coal? 

Mr. Drake. No, sir; not that I know of. 

Mr. Shackleford. It has all been furnished by the Panama Rail¬ 
road without competition ? 

Mr. Drake. Yes, sir. We received a communication from the Com¬ 
mission asking us to furnish them with such coal on the Isthmus as 
they required. 

Mr. Shackleford. Who is president of that company from which 
you buy your coal ? 

Mr. Drake. I do not know that it has a president. It is a business 
concern, or firm. 

Mr. Shackleford. Are any of the Commissioners stockholders in it ? 

Mr. Drake. No, sir; not that I know of. 

Mr. Shackleford. Are any of the directors of the PanamaRailroad 
directors in it ? 

Mr. Drake. No, sir; not that I know of. No, sir; I can safely say 
that they are not. 

Mr. Shackleford. Was there up for consideration during the year 
1903 or 1904 any proposition under the contract with the Pacific Mail 
Steamship Company 

Mr. Drake. No, sir: the contract was running. 

Mr. Shackleford. I know, but was there a proposition to amend 
or modify that contract, which was pending before the board of di¬ 
rectors of the Panama Railroad Company? 

Mr. Drake. No, sir. 

Mr. Shackleford. Prior to last October? 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 167 

Mr. Drake:. Not that I recollect. I would recall it immediately if 
there had been. 

Mi. Shackleford. Mho is the Brown Hoisting Machinery Com¬ 
pany ? & J 

Mr. Drake. I do not know them at all. 

JVIr. Shackleford. Have you had any connection or any business 
a flairs with them ? . 

Mr. Drake. No, sir. 

Mr. Cromwell. That is a large Cleveland firm, is it not ? 

Mr. Drake. I do not know them at all. 

Mr. Shackleford. M here do you get the coal that you purchase: 
where is it delivered to you ? 

Mr. Drake. At Norfolk. 

Mr. Shackleford. Do you know where it comes from ? 

Mr. Drake. It comes from along the Norfolk and Western Rail¬ 
road. It comes from the mines of Castner, Curran & Bullitt—the 
Pocahontas Coal Co. 

Mr. Shackleford. That is all I have to ask. 

Mr. Wanger. Do I understand you that you think that the Panama 
Railroad Company, through its steamship line from New York to 
Colon and its agreement with the Pacific Mail Steamship Company, 
secures the largest possible revenues for its operation ? 

Mr. Drake. Yes, sir; I desire to so state. We have an agent in San 
Francisco who is engaged for the purpose of “keeping tab,” I may 
say, upon the operations there, and to see that the market is canvassed, 
and that all freight that can be attracted our way is attracted and 
carried our way. We do the same thing at this end, and the evidence 
is that our ships are going out fully loaded with a San Francisco 
cargo, and we had a few days ago, at Panama, to deliver to the 
Pacific Mail Steamship Company an accumulation of 4,000 tons of 
San Francisco cargo bound north, and the ships are coming down 
full. 

Mr. Wanger. Do you think that the volume of the freight or the 
number of passengers might have been materially increased if it had 
not been for that contract with the Pacific Mail Steamship Company? 

Mr. Drake. That it could have been increased ? 

Mr. Wanger. Yes; materially. 

Mr. Drake. I can not say as to that, but I do know under the con¬ 
tract traffic has not been developed to its possibilities. The Pacific 
Mail Steamship Company have done exactly what we have done in 
regard to constructing ships for the route. Expecting a continuance 
of this contract, and believing and hoping that the only American 
line running to the Isthmus would be fostered and not discriminated 
against, the Pacific Mail Company, as I learned through interviews 
with their officials, had prepared specifications and invited bids for 
the construction of three large vessels to place on their line, to run 
in connection with the vessels w T e w T ere expecting to build, for which 
we had plans and specifications prepared upon w T hich to invite bids. 
All of that work for both companies has been stopped. There is one 
thing I would say, and that is if both lines were encouraged to go 
ahead with their construction the business can be developed very rap¬ 
idly and be made very much more profitable, so that by the time the 
canal is completed there will be a good strong American line ready 
to run through the canal the first day it is opened. There are sev- 


168 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

era! lines seeking to share the business of the company’s line to Colon 
by making that point a port-of-call, in connection with our railroad, 
they to be allowed a differential in rates because of delayed or slow 
service. We have refused the connection, as it would render the sit¬ 
uation ruinous for us by reason of cheap competition. If such con¬ 
nection be allowed there is nothing to prevent Pacific Mail from 
restoring its line on the Atlantic to connect with their Pacific service, 
and thus secure control of our coastwise business. We have had 
instances of the effect of such competition as I refer to above in con¬ 
tracts that we have placed recently for carrying canal materials to 
the Isthmus for the Commission. 

Mr. Wanger. Your judgment, then, is strongly against abrogating 
the contract with the Pacific Mail Steamship Company? 

Mr. Drake. I am strongly against doing so, unless another or other 
lines can be found to provide as good or better connection for our 
railroad. 

Mr. Stevens. You think those ships will not be built except under 
the assurance of an exclusive contract? 

Mr. Drake. It would be unwise for them to build them for that 
service, which requires special type of vessel, as we do. Our vessels 
are adapted to long voyages for passengers and cargoes. 

Mr. Townsend. I want you to look at this paper and see if that is 
a correct statement of the matters therein set forth (handing witness 
paper) ? 

Mr. Drake. Yes, sir; that is a correct statement of the fees received 
by the directors and members of the executive committee. 

Mr. Townsend. You showed me this letter, and I do not know 
whether that has been marked or not (handing witness another 
paper). 

Mr. Drake. That is a correct copy. 

Mr. Townsend. That is a correct copy of the letter, is it? 

Mr. Drake. It is a correct copy. 

(The two papers above referred to are here copied in the record, as 
follows:) 

Not furnished. 

(Thereupon the committee took a recess until 2 o’clock.) 

AFTERNOON SESSION. 

Washington, D. C., February 20, 1905. 

The committee met at 2 o’clock p. m., Hon. James R. Mann (acting 
chairman) in the chair. 

STATEMENT OF ME. RICHARD L. WALKER. 

Mr. Shackleford. What is your official connection with the Pan¬ 
ama Railroad ? 

Mr. Walker. I am traffic manager of the Panama Railroad and of 
the Panama Steamship Line. 

Mr. Shackleford. In determining rates between New York and 
San Francisco, what was the basis used ? 

Mr. Walker. The basis is the transcontinental lines freight tariff. 



INVESTIGATION OF PANAMA RAILWAY COMPANY. 169 


Mr. Shackleford. How did you attempt to have your rates com¬ 
pare with the transcontinental tariff ? 

Mr. Walker. We try to get freight at 30 per cent less than the 
transcontinental rate for shipments in less than carloads, and 20 per 
cent less for shipments in carloads; and we make those rates apply to 
a zone about New York, as far as an absorption of 20 cents a hundred 
pounds, of the inland rate. 

Mr. Stevens. It would apply to all rates not exceeding 20 cents a 
hundred pounds? 

Mr. Walker. Yes, sir. 

Mr. Stevens. Into New York? 

Mr. Walker. Yes, sir; and for the rates exceeding 20 cents a hun¬ 
dred into New York we usually add the excess to the rate. If that 
does not bring us sufficient business, we disregard the tariff altogether, 
and make a special rate; cut it down to what will get the business. 
For instance, we used to get a good deal of the low class dry goods 
business from New York to San Francisco when there were no car¬ 
load rates for that class between New York and San Francisco. Their 
rate, say, was $1.50, and 30 per cent off made our rate $1.05. It was a 
material saving, and the shipper could afford to pay the marine insur¬ 
ance from that. But the railroads finally put in a carload rate of 
$1, and I offer 40 per cent off of that, but it is not attractive. 

Mr. Stevens. Why ? 

Mr. Walker. Sixty cents is not low enough to get the business, 
because they have to pay the marine insurance on it; and I can get 
other freights—other classes of freights—to fill up our ships which 
will make a better net revenue for us than to cut that rate lower. 

Mr. Stevens. How have the rates over your line, for instance, from 
Hamburg to San Francisco compared with the rates made by the 
other line by the way of the Straits of Magellan from Hamburg to 
San Francisco? 

Mr. Walker. The Hamburg line makes rates in consultation with 
us to meet the competition via New Orleans more particularly than 
via Magellan, and the Isthmus route has never been able to get much 
business from Europe to San Francisco. Last year the total tonnage 
from Europe to San Francisco by the Hamburg line and the other 
seven lines running into the Isthmus was only 2,938 tons. 

Mr. Stevens. That is all those lines brought ? 

Mr. Walker. Yes, sir. 

Mr. Stevens. Have you any idea how much went by the other route 
that I have spoken of ? 

Mr. Walker. Via Magellan to San Francisco? 

Mr. Stevens. Yes. 

Mr. Walker. Verv little. The line that runs from Hamburg via 
Magellan calls at alb the ports up the coast and it is discharging and 
loading cargo all the time just like a stage coach, in and out all up 
the coast, and it does not carry very much through cargo either way. 

Mr. Stevens. The majority of the cargoes for the Pacific slope 
that have come from Europe have come by way of New Orleans. 

Mr. Walker. They come by way of New Orleans and Norfolk and 
Montreal and New" York. The Northern Pacific and Canadian 
Pacific are very strong factors in the business from Europe for the 
Pacific coast. They are verv strongly competitive. I was several 
years ago with the R. F. Downing Company, forwarding agents, 


170 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


and we handled a great deal of that business, and actively fought 
that competition all the time. 

Mr. Stevens. Have the Canadian Pacific their own lines from 
Vancouver down? 

Mr. Walker. I do not know whether they have now or not. I do 
not think they have. 

Mr. Stevens. Is there any freight moved to the Pacific coast in the 
grain vessels—those vessels that come to the Pacific coast to be loaded 
with grain from the coast to Europe? 

Mr. Walker. What class of freight ? 

Mr. Stevens. General merchandise. 

Mr. Walker. From Europe? 

Mr. Stevens. From Europe. 

Mr. Walker. To San Francisco? 

Mr. Stevens. Yes; and other Pacific coast ports. 

Mr. Walker. It never has appeared to me a material factor. 

Mr. Wanger. Has not the tariff of the Pacific Mail Steamship 
Company from Panama to San Francisco been an obstacle in the way 
of securing freight from Hamburg and other European points by way 
of the Isthmus ? 

Mr. Walker. No, sir. The authority to make the through rates is 
vested particularly in the initial carrier, and the Panama Railroad 
has insisted upon the lines from Europe to Colon making rates to 
compete with the rates put out by the lines connecting with the South¬ 
ern Pacific at New Orleans; and three years ago they made a tariff 
by weight altogether in place of the former tariff by weight or meas¬ 
urement. We could not get any freight at all from Europe to San 
Francisco when the shipper did not know whether the steamship w r as 
going to charge by measurement or the weight of the goods, because 
he knew just what he was going to pay by weight by way of New 
Orleans. So the European lines, after considerable discussion, agreed 
to waive the question of measuring the goods, and to take them by 
weight. They have recently^ lowered the rates, after consultation 
with us, to see if they could not build up a business. This 3,000 tons 
that I speak of is a gam of 1,200 tons over the year before. 

Mr. Shackleford. Has there been any commerce across the Isth¬ 
mus to and from Gulf ports? 

Mr. Walker. During the last year the United Fruit Company 
have established a line from New Orleans to Colon, and have 
carried freight to the Isthmus for distribution up and down the 
coast. They can not carry the San Francisco business because they 
use foreign steamers altogether. They will not take homeward 
freight, freight to New Orleans. They leave Colon empty, and load 
with bananas, practically, at Port Limon to go to New Orleans. 

Mr. Shackleford. Would there not be a trade, then, if they would 
engage in it? 

Sir. Walker. Yes; we tried to induce them to handle some coffee 
business, and they did take a little; but then they stated that they 
did not want to go generally into the business, because the quarantine 
at New Orleans might interfere with the banana traffic, and bananas 
have to be discharged promptly at New Orleans in order to be deliv¬ 
ered in good condition. 

Mr. Shackleford. Is there a business which can be built up be¬ 
tween Gulf ports and the Panama Railroad? 


INVESTIGATION OF PANAMA RAILWAY COMPANY. l7l 


Mr. Walker. That is what we are looking for, between the Pan¬ 
ama Railroad and the Gulf ports, outward. That is a growing busi¬ 
ness. The United Fruit Company have been in it only about a year. 
Several years ago (I think it was in 1900 or 1901) w r e tried to find 
some line that would operate between New Orleans and the Isthmus. 
No one was ready to go into the business then. But last year a storm 
in Jamaica injured the crop, and the United Fruit Company found 
the banana steamers on their hands without much to do, and therefore 
they thought that they would run their steamers into Colon and make 
an arrangement with us to handle bananas there. We invited that 
competition with the business that was already there, and that was the 
inauguration of their line. They then finally decided that they 
would go in with us and make the same rates from New Orleans to 
all the Pacific ports—foreign ports—that we did so as to get the 
business from the Middle West. 

Mr. Shackleford. When you say the “ same rates,” do you mean 
the same rates as from New York? 

Mr. Walker. Yes, sir. 

Mr. Shackleford. Ought not the rate from New Orleans, in order 
to compete for that sort of freight, to be lower than the rate from 
New York? 

Mr. Walker. No, sir; I do not think so, because naturally there 
is a certain territory which will feed New Orleans, and a certain 
other territory which will feed New York, according to the rate from 
the initial point. My idea in making that arrangement was that the 
beer from St. Louis would go that way instead of going by way of. 
New York, as it had been doing, and that such rates probably would 
draw cargo from as far north as Chicago, and take in the whole 
Mississippi Valley. 

Mr. Shackleford. Have you been shipping St. Louis beer from 
New York? 

Mr. Walker. Yes, sir; from St. Louis to New York, and then 
south. Not on through rates. We do not make any through rates 
on foreign business from the interior. That is principally because of 
the customs regulations. 

Mr. Shackleford. Now, to get St. Louis beer, for instance, from 
New York, say, what would be its destination? 

Mr. Walker. Generally Colon or Panama. 

Mr. Shackleford. And that would be distributed ? 

Mr. Walker. It goes into consumption. 

Mr. Shackleford. It goes into consumption there ? 

Mr. Walker. Yes, sir. . 

Mr. Shackleford. You do not ship anv for South American ports ( 

Mr. Walker. I think the ports on the other side get their beer from 
Chile. 

Mr. Shackleford. Flour and grain that went from that direction 
would go from the port of New \ork? 

Mr. Walker. Most of the flour on the Panama side goes down from 
San Francisco, and it has been a very strongly competitive article. 
We have competed as far as possible with the Pacific Mail to get some 
of the business in New York, but the consumers like the strong west¬ 
ern flour better, and we can not keep the trade to the New York side. 

Mr. Stevens. How about machinery from Chicago and Ohio; 
which way would that move ? 


172 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Walker. To the foreign ports that would move by the way of 
New York under the old arrangement. I do not know whether any 
of it has been moved through New Orleans this last year or not. The 
shipments we deal with to foreign ports are all handled by commis¬ 
sion merchants in the city of New York. They go to the various con¬ 
suls and take out consular invoices, and make the declarations at the 
custom-house which the United States laws require regarding exports, 
and all that tends to keep the business in the form of originating at 
New York, although I think that at New Orleans the steamship 
agency has arranged to do the clearing for the interior shippers. Of 
course the result of that has been to make the NeAv York shippers very 
much provoked. They see their business passing away. “ Well,” I 
say, “ you can not have it always.” 

Mr. Shackleford. That is the point I was trying to get some light 
on, whether or not there is not a large possible trade from Gulf ports 
by way of the Isthmus. 

Mr. Walker. I should think there was. I should think the whole 
Middle West could ship that way very profitably. 

Mr. Esch. You say the United Fruit Company, from Gulf ports 
to the Isthmus, does not engage in San Francisco traffic? 

Mr. Walker. They are all foreign steamers. They are mostly 
Norwegian steamers. 

Mr. Esch. Would the fact that you had an exclusive contract with 
the Pacific Mail have any effect on that? 

Mr. Walker. No, sir; the Pacific Mail is bound to take our freight^ 
everything we can give them at Panama, and we could have a line 
‘from every port in the United States on the Atlantic side to the 
Isthmus and they would be bound to carry that freight forward from 
us on the other side. 

Mr. Esch. Yes. 

Mr. Stevens. There is no reason under the law why goods billed 
from San Francisco to the Isthmus should not be rebilled from the 
Isthmus to New York, is there? 

Mr. Walker. That question came up some years ago when some 
one shipped some freight from here to Europe, and then reimported 
it in bond at San Francisco, and I understand that the Government 
won on its contention, and forced the shipper to pay duty on those 
American goods that had been shipped to Germany and reimported. 
That is precisely parallel to the case you suggest. 

Mr. Stevens. So that freight has to be billed through in order to 
escape duties? 

Mr. Walker. Yes, sir; the customs authorities require us to file 
at the custom-house in New York a full statement of all the cargo 
that we carry out of New York for San Francisco, and it is under 
the charge of the American consul at the Isthmus, and he sees that 
no foreign cargo is substituted for the American cargo that left here, 
and then the collector at San Francisco checks the cargo discharged 
by the Pacific Mail as the cargo that left New York. 

Mr. Stevens. Then that business, under the law, must be carried 
in American vessels? 

Mr. Walker. Yes, sir; that is certain. 

Mr. Stevens. 'Now, on that point, I would like to pursue this for 
a moment, Mr. Walker, on the line on which I was questioning Mr. 
Drake this morning. Will there not be quite a large increase of busi- 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 173 


ness from Puget Sound and San Francisco to the Isthmus on account 
of the construction of the canal in the carriage of supplies, and so 
forth? - 

Mr. Walker. I should imagine that there would be, because the 
Pacific coast can compete for delivery there with delivery from the 
Atlantic coast. 

Mr. Stevens. Yes. Now, that large increase of business w T ill 
attract tonnage, will it not? 

Mr. Walker. I should think it would. 

Mr. Stevens. So that when your contract with the Pacific Mail 
Steamship Company shall be completed next July there will be an 
inducement for those ships to continue in that Pacific coast business? 

Mr. Walker. Well, as long as they could get those supplies. 

Mr. Stevens. And other business. You see the point? In the 
first place, there is the Pacific coastwise business between the Pacific 
coast and the Atlantic coast, and the Gulf, which must be carried in 
American bottoms. There is one source of freight. The second 
source would be the amount of construction material sold by Pacific 
coast people, such as lumber and rough stuff like that- 

Mr. Walker. Yes, sir. 

Mr. Stevens (continuing). To the canal authorities for the con¬ 
struction of the canal. Now, those two sources of business will 
attract tonnage from the Pacific coast to the Isthmus, will they not? 

Mr. Walker. You spoke, as I understood, of coastwise traffic? 

Mr. Stevens. Yes, sir. 

Mr. Walker. So far, no American vessels have been found to do 
that particular business for the Government. The traffic has moved 
in the German steamers which go from Puget Sound to San Fran¬ 
cisco, and then to some port in Mexico, and to another and another 
port, and so on down the coast, carrying freight and discharging at 
these different ports, lifting freight from each port and carrying it to 
ports farther down and making the port of Panama incidentally a 
port of call. 

Mr. Stevens. You understand why that was carried in German 
vessels ? 

Mr. Walker. I understand. 

Mr. Stevens. Because they would break cargo, and the others 
would not. An American vessel Avould require a full cargo, and the 
German would break cargo if required to do so. 

Mr. Walker. The German vessel is the omnibus, taking cargo and 
dropping it in small lots, in that way. 

Mr. Stevens. When this traffic increases so that there will be more 
vessels, will there not be American vessels to carry that freight? 

Mr. Walker. That would depend entirely on what rates those 
Germans would be willing to take and whether or not those vessels 
could get a better freight than freight to Panama. American vessels 
are so few that generally they can afford to go in some protected 
territory and leave these open ports to the foreign flags. 

Mr. Shackleford. What do you mean by 44 protected territory? ” 

Mr. Walker. Such as the coastwise business; business that the 
foreign ships can not take, business that is protected by our coastwise 

Mr. Shackleford. Were it not for that this traffic would be profit¬ 
able, would it not, which Mr. Stevens has spoken of? 



174 INVESTIGATION OF PANAMA RAILWAY COMPANY, 


Mr. Walker. Well, I should think if a foreign vessel finds it profit¬ 
able, that a foreign vessel which has an American registry ought to 
find it profitable. They say, however, that they do not. They say 
that under the American flag they are obliged to pay higher wages; 
but I have no personal knowledge on that point. I do know, though, 
that I recently had occasion to find a vessel to carry a large number 
of cars for the Commission to the Isthmus, and that I went to an 
American owner of a vessel which recently secured American regis¬ 
try, and the only one I know of that was capable of carrying those 
cars because of the size of the large hatches, and he did not care to 
compete for that business when he knew that I was inviting bids from 
foreign vessels. He said that there was no use; that he could not com¬ 
pete. Now, whether his vessel had become capitalized at too high a 
figure I do not know. The probability is that he could find more 
profitable employment for her where the business was confined to the 
American flag. 

Mr. Stevens. Now, supposing that Congress extended the coast¬ 
wise laws to embrace the Isthmus, providing that the trade between 
the Isthmus and any part of the United States should be coastwise 
trade, what would be the effect of such a provision as to the rates 
between the United States and the Isthmus, and the traffic between the 
United States and the Isthmus? Would it increase rates or increase 
traffic ? 

Mr. Walker. You mean through rates ? 

Mr. Stevens. I mean the rates, through and local rates. 

Mr. Walker. That would naturally keep rates up by limiting . 
competition. 

Mr. Stevens. It would increase rates some at first? 

Mr. Walker. It would naturally increase rates. 

Mr. Stevens. Would it not also increase facilities? For instance, 
the Pacific Mail would certainly continue in that business, because 
it would be coastwise business. 

Mr. Walker. It would not change the status of the Pacific Mail 
Company, because that is an American line now. 

Mr. Stevens. Then it would have a monopoly, and would carry 
all of that traffic, irrespective of any contract? 

Mr. Walker. It would not alter what they do now, because the 
freight to and from the various ports of call in Central America 
and Mexico can be carried in foreign vessels. I heard a question 
which was asked of Mr. Drake this morning which I think bears on 
what you are asking now, and that question was about the Pacific 
Mail keeping in the business under any circumstances. The most 
profitable traffic that any of us have—the most profitable single 
item—is the coffee that moves from Central America to Europe. The 
great bulk of that moves in January, February, March, and April, and 
at that season anybody who has a ship down there would like to do 
that business, take the cream, and not run any other time of the year. 
Of course the wish of the Pacific Mail Steamship Company is to 
prevent that tramp business by way of the Isthmus, and, in order 
to induce the Pacific Mail to keep up a regular weekly service, we 
made that exclusive arrangement which is about to expire, to protect 
them in this good, paying business, while they are making the 
regular service for the less remunerative business of the other parts 
of the year. The through rate between New York and San Francisco 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 175 


averages about $12 a ton out, and about $9.74 a ton home. That 
was last year. Half of that goes to the Pacific Mail and, of course, 
it is not a very remunerative business for the long haul. The coffee 
they take up in Central America is hauled from 500 to 1,000 miles, 
I suppose, and they put it in the place of cargo which they have dis¬ 
charged on the way down from San Francisco. In other words, 
between San Francisco and Panama, steamers receive practically two 
freights for the same room, whereas on the cargo from San Francisco 
to New York if they only get the one. 

Mr. Stevens. So that that traffic is much more profitable than the 
through traffic from New York? 

Mr. W alker. The foreign traffic is very much more profitable to 
us all. In fact, if we had nothing but the San Francisco traffic to go 
via the Isthmus we would all have to go out of it—that is, with 
the American ships. 1 think if we had some of the cheap foreign 
tramps, if they could do that business (United States coastwise), 
they might be able to make money on it. They would take ten days 
to run from New York to the Isthmus instead of seven. 

Mr. Stevens. And they would take two weeks running up? 

Mr. Walker. A direct line would take two weeks. The Pacific 
Mail are about twenty-two days making the trip, including the stops 
between Panama and San Francisco. 

Mr. Shackleford. Those stops delay them very greatly ? 

Mr. Walker. I suppose those stops account for a week. 

Mr. Stevens. If the railroad is subordinated to the construction of 
the canal, so that freight is delayed, what difference will that make on 
the volume of freight that would be moved ? 

Mr. Walker. The business would shrink. My own opinion of that 
is that the subject would be forced upon the State Department. I 
think that the lines in Europe which have interests in carrying 
freight to the Isthmus and have been making a profit would interest 
their home governments to insist that the line that had been kept 
open there for fifty years should be kept open for the commerce of 
the world. 

Mr. Stevens. Do you think the treaty would affect that ? 

Mr. Walker. That is not the question. The question would be 
that the United States, by becoming the owner of the railroad and 
refusing to give the facilities which the world had enjoyed heretofore 
on the Isthmus, would be injuring all these foreign capitalists. 

Air. Adamson. Have you any reason to fear that the railroad can 
not do the work we need from it in building the canal, without im¬ 
pairing its usefulness? 

Air. Walker. I have not the slightest doubt that the railroad can be 
operated so as to take care of the traffic and to build the canal. 

Air. Esch. It is a single-track railroad. 

Mr. Wal ke r. Yes, sir; but I should say that it should be double 
tracked. 

Mr. Adamson. There are many, many miles of double track—of 
long sidings. 

Mr. WAlker. Yes, sir. 

Mr. Adamson. It struck me that it was in better condition than 
many of the trunk lines in this country. 

Air. Walker. Yes, sir. 

Air. Lovering. And they have the rails, have they not ? 


176 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

Mr. Walker. Yes, sir. 

Mr. Stevens. Would not this be true, that any difference in the 
traffic between New York and' San Francisco would make a difference 
in freight rates between New York and San Francisco? 

Mr. Walker. Anything that handicaps the Isthmus route leaves 
the railroads free to make an agreement with the one concern that has 
seen fit to establish a steamship line via Magellan, and they certainly 
would agree to get all there was in the business out of it. 

Mr. Stevens. So that you think the one regulator is the Isthmus 
route ? 

Mr Walker. Yes, sir. 

Mr. Shackleford. And it will cease to be a regulating route if it 
has not its present connection with a steamship line? 

Mr. Walker. Yes, sir. Certainly you can not do anything with 
this little 48-mile railroad if you have not a steamship line there to 
give it an outlet. 

Mr. Stevens. Yes; on both ends? 

Mr. Walker. Yes, sir. 

Mr. Esch. Your total tonnage was about 400,000 tons last year? 

Mr. Walker. Yes, sir; on the Isthmus. 

Mr. Esch. What is the total of the transcontinental tonnage; have 
you any idea ? 

Mr. Walker. No, sir. I looked it up several years ago. I think 
it was about four years ago, and at that time we carried one-sixth of 
the total business from the Atlantic coast territory to the Pacific 
coast. 

Mr. Stevens. One-sixth of what ? 

Mr. Walker. Of the total tonnage moving from the Atlantic sea¬ 
board to the Pacific seaboard of the United States. 

Mr. Stevens. That would not include the fruit shipments? 

Mr. Walker. I learned from Mr. Stubbs the number of tons that 
were carried by the transcontinental railroads, and I found that 
there were carried by the way of the Straits of Magellan one-sixth. 
We carried one-sixth, and together with what Magellan carried that 
made one-third of the business. 

Mr. Stevens. That would include general merchandise, but not 
fruits ? 

Mr. Walker. I do not know whether Mr. Stubbs included the fruit 
or not. He could not have included fresh fruits, because they are not 
a factor in the business of the Isthmus route, which occupies a month 
in transit. 

Mr. Stevens. Fruits were excluded from that estimate, then? 

Mr. Walker. Yes, sir. I do not know whether it included dried 
fruits. 

Mr. Stevens. You say that you carried a sixth and the Straits of 
Magellan a sixth ? 

Mr. Walker. Yes, sir. At that time they had only sailing vessels, 
and they were building then those large steamers which they have 
since put on. The question was whether the Isthmus and the trans¬ 
continental lines would be wiped out of existence or not by the tre¬ 
mendous capacity of those big vessels. A sailing vessel was of 3,000 
tons capacity, but those big fellows—those steamers—were 12,000 
tons. 


177 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 

v } 1 Shacklefokd. What has been the effect of that? 
l. alker. J he coast business have grown; the business is very 
much larger since the Philippines have been opened up. I do not 
viiow whether our business has increased in proportion to the others 
? but business has increased all the time. 

Mr Shackleford. You do not know what has been the effect of the 
Magellan business? 

Mr. TV alker. The Magellan steamers are running full. The next 
steamer can not take any more freight. She has a full cargo. Thev 
run a regular schedule—once a month. 

* Shackleford. TV ould a reduction in your rate increase the 
traffic as against the Magellan route? 

Tli. IT alker. Undoubtedly ; if we carried our freight cheaper than 
Ave are taking it hoav Ave Avould get a great deal more freight, if we 
could carry it. 

Steaens. T on do not get any of the Hawaiian sugar business? 

Mr. TV alker. No, sir. 

Mr. Stevens. That all goes by the Magellan route? 

Mr. Walker. The sugar ? 

Mr. Stevens. Yes. 

Mr. TV alker. 1 do not think it all goes by the Magellan route. 
Some of it has gone to San Francisco, and moA^ed oA 7 er the Southern 
Pacific to XeAv York. 

Mr. Shackleford. TV hat is the Isthmus rate as compared with the 
Magellan rate? 

Mr. Walker. Sometimes Ave have to take a lower rate than the 
Magellan line. For instance, I have in mind the one item of sapolio. 
A grocer caries boxes of sapolio on his shelves, and to get them dirty 
or break them in rehandling at the Isthmus forces the consignee to the 
expense of repacking. Shelf goods can go on the Magellan steamer 
in NeA\ T T ork and be landed in San Francisco in first-class condition. 
I just take that as an instance. 

Mr. Shackleford. What is it in general ? 

Mr. Walker. In general I think our average rate is higher than 
theirs. 

Mr. Esch. In stating that you carried one-sixth of the total traffic, 
did you include there the traffic that passed from the Atlantic to the 
Pacific side ? 

Mr. Walker. Yes; the total traffic. 

Mr. Esch. The total traffic? 

Mr. Walker. Yes, sir. 

Mr. Esch. Then the line, in managing and controlling one-sixth 
of the transcontinental traffic, would have sufficient to regulate the 
rates on the transcontinental railroads ? 

Mr. Walker. No, sir; we control a third. 

Mr. Esch. That is, your route and the Magellan route control one- 
third betAveen them ? 

Mr. Walker. Yes, sir; they carried a sixth and we carried a sixth. 

Mr. Loa ering. How many independent transcontinental lines are 
there ? 

Mr. Shackleford. Would not that be a very difficult question to 
answer ? 

Mr. Lovering. I thought that he might answer it. 


PAN RY— 05-12 


178 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

Mr. Walker. 1 suppose there are the Southern Pacific, the Atchi¬ 
son, the Northern Pacific, and Canadian Pacific. I think others are 
merged together. 

Mr. Stevens. The Union Pacific and the Great Northern are two 
more. 

Mr. Walker. The Union Pacific and the Southern Pacific are syn¬ 
onymous to me. I thought that the others were left separate. I 
thought the merger suit had settled that. 

Mr. Stevens. Settled that they should be kept separate ? 

Mr. Walker. Yes, sir. 

Mr. Lovering. You say the freight rate from New York to San 
Francisco via the Panama Railroad is $12. What class of freight do 
you refer to in that ? 

Mr. Walker. That is the average rate on the total tonnage, 

Mr. Lovering. Now, what is the transcontinental rate; do you 
know that ? 

Mr. Walker. I have no idea. I would have to know their total 
tonnage and total revenues.to get at that, 

Mr. Mann. How do you get the average rate on that? 

Mr. Walker. I take the total number of tons and divide into the 
total revenue, and it shows that I got $12, on the average, per ton. 

Mr. Mann. That, of course, has nothing to do with the average 
rate ? 

Mr. Walker. No, sir. A great deal of that freight only pays $9 
a ton. 

Mr. Shackleford. For comparison, take some commodity and 
make a comparison between the rate on your line and the transconti¬ 
nental line. 

Mr. Walker. The easiest comparison is that my rate for less than 
carloads is 30 per cent less than theirs. 

Mr. Shackleford. Do you make a rate 30 per cent lower than the 
transcontinental rate ? 

Mr. Walker. Not absolutely. I do not have force enough to work 
up a book like that [indicating pamphlet], so I send to the commis¬ 
sioner and get that book and give my billing clerks a tariff, and I say 
to them “ Bill according to that.” That is the transcontinental classi¬ 
fication to which I refer [indicating pamphlet]. 

Mr. Mann. Now, do you make a tariff rate—you have a published 
tariff rate ? 

Mr. Walker. Yes, sir. 

Mr. Mann. Is that published tariff rate based on the 30 per cent 
discount from the transcontinental published rate ? 

Mr. Walker. Yes, sir. It reads in this way. I first have a set of 
class rates running from $1.80, first class, down to class E, 70 cents. 
But practically little or no freight moves under those rates, because 
the transcontinental lines have covered nearly everything we carry by 
a commodity rate. 

Mr. Mann. I was going to ask you how many commodity rates you 
have. 

Mr. Walker. As many as they have. I take their tariff. 

Mr. Mann. They do not have a very large number of commodity 
rates, do they ? 

Mr. Walker. From New York to San Francisco? 

Mr. Mann. Yes, sir. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 179 

Mr. Walker. They have G5 pages of them. They cover pretty 
nearly everything that moves. 

Mr. Mann. Sixty-five pages of commodity rates? 

Mr. Walker. Yes, sir. Now, my instructions to the billing clerks 
are that the commodity rates from New York will be those of the 
transcontinental west-bound tariff, in effect at the time of shipment, 
less the following discounts: Carloads, 20 per cent; less than carloads, 
30 per cent,observing a minimum of 40 per cent per hundred pounds— 
$8 per ton. 

Mr. Mann. In other words, your rates are less, 20 per cent less, than 
the transcontinental carload rates, and 30 per cent less than less car¬ 
load rates? 

Mr. Walker. That is right, as a general proposition. 

Mr. Mann. But you do not carry anything at less than 40 cents, as 
a minimum rate ? 

Mr. Walker. That is the lowest rate Ave take. 

Mr. Mann. Do you ever make any concessions? 

Mr. Walker. There are large houses in San Francisco with which we 
made arrangements to carry all of their consignments at the less than 
carload rate without regard to the quantity, because the Morgan line, 
the Southern Pacific Company, were prepared to allow large shippers 
to accumulate their cargo from the interior on the wharf in New York 
until there was a carload, and then bill the accumulation at the car¬ 
load rate. 

Mr. Mann. You said a moment ago “At the less than carload rate.” 
You meant to say at the carload rate? 

Mr. Walker. Yes, I meant the carload rate, although less than a 
carload moves at the particular time. It may be that when cargo for 
one consignee arrh r es at the Isthmus there may be a carload to cross 
the Isthmus, by the accumulation, or there may not be. But I can not 
afford the space on our wharf to accumulate that cargo, as our wharf 
has to be used for discharging as well as loading ships, which limited 
space in New York forced me to adopt that plan with the larger ship¬ 
pers in San Francisco. 

Mr. Mann. Which, of course, is a violation of the law which we 
have put upon railroads. But that does not apply to you, of course. 

Mr. Walker. That is what I thought. We have never felt that the 
interstate commerce law applied to our line, which is a water line. 
That 48 miles of road across the Isthmus hardly counts for anything 
else but a connecting link. 

Mr. Mann. It might be a question Avhether it comes under the 
sovereignty of the United States. Did you ever make any other con¬ 
cessions or pay any rebates or give any preferences in any other ways? 

Mr. Walker. No, sir; we have never made any arrangement with 
any shipper that we would not make with any other shipper under the 
same circumstances. 

Mr. Stevens. And all published ? 

Mr. Walker. Yes, sir. 

Mr. Mann. You say vour rates are based on the discount off the 
regular published transcontinental rates. From those rates do you 
give any discounts? 

Mr. Walker. Yes, sir; we make changes when Ave find that those 
rates are not low enough to get a particular class of business and we 
Avant that business. In such a case we will make another rate for it. 


180 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


For instance, I have a rate with one company of 45 cents a hundred 
pounds from New York to San Francisco. The same rate applies to 
the shipments of another company from another section. According 
to my tariff I would make the transcontinental rate less the discount 
and pay the freight from the shipping point into New York if it did 
not exceed 20 cents a hundred pounds. 

Mr. Mann. What would be the transcontinental rate from New 
York? , ; 

Mr. Walker. On this class of goods? 

Mr. Mann. On that class of goods. 

Mr. Walker. Well, some of it would be 75 cents a hundred pounds. 

Mr. Mann. And upon that you would make a discount of 20 per 
cent for carload lots ? 

Mr. Walker. Twenty per cent would be 60 cents. 

Mr. Mann. And you make a rate of 45 cenjts? 

Mr. Walker. The freight into New Y r ork might be 20 cents, which 
would get me down to my minimum of 40 cents; but I get 45 cents 
from it. 

Mr. Mann. What is that, wire ? 

Mr. Walker. That was wire. 

Mr. Mann. Your rate on wire is 60 cents from New York to San 
F rancisco ? 

Mr. Walker. Y 7 es, sir. 

Mr. Mann. Based on the transcontinental rate ? 

Mr. Walker. New Y ork and common points. 

Mr. Mann. I understand. Now, in order to get points west of New 
York in the Atlantic seaboard territory you pay the rate from those 
points to New Y r ork? 

Mr. Walker. If it does not exceed 20 cents. 

Mr. Mann. I understand, but that does not affect your rate from 
New York. Your rate is 60 cents. Now, what rate do you make to 
the American Wire and Steel Company ? 

Mr. Walker. The shipments of the American Wire and Steel Com¬ 
pany move from Worcester, Mass., formerly the Washburn, Moen 
& Co. 

Mr. Mann. Is that a published rate? 

Mr. Walker. That is a published rate [referring to printed tariff]. 
These things are not distributed broadcast, if that is what you mean. 

Mr. Shackleford. They are published where you and they can see 
them ? 

Mr. Walker. Yes, sir; or anybody else. 

Mr. Mann. You say “ anybody else.” What we want to do is 
simply to get at the facts. 

Mr. Walker. I understand. I have nothing to conceal. I have 
given these tariffs to everybody who has asked for them. 

Mr. Mann. You have been doing this for the benefit of this 
property ? 

Mr. Walker. Y r es, sir. 

Mr. Mann. But, on the other hand, the Government comes in now, 
and it is a question whether the Government can afford to do those 
things itself which it forbids other people to do, and we wish to ascer¬ 
tain what the fact is, from the Governmental point of view, not from 
the point of view of the man who works for the company. 

Mr. Walker. Now, Mr. Chairman, the point in that matter is where 
we compete; if I publish a tariff via the Isthmus, and say that my 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


181 


rates are 30 per cent less than all-rail rates on less than carloads, and 
20 per cent less for carloads, that is nothing* but an agreement with 
the transcontinental lines on differentials. Now, I do compete, and 
have increased the business to 50 per cent greater than what it was 
when 1 first went with the line. 

Mr. Mann. If you do not get business enough on that differential, 
you cut rates? 

Mr. Walker. I go farther away, generally, to get the business. I 
go to St. Louis and Chicago to get the business; and that partially 
is what makes the so-called “ postage-stamp ” rate on the whole ter¬ 
ritory east of the Mississippi River, because I go anywhere to get the 
business, just as the Magellan Steamship Line does. 

Mr. Mann. And we have a great complaint about that, just because 
your line does that thing. 

Mr. Walker. You can not bottle the ocean. 

Mr. Mann. A e can make you live up to the published tariff rate, 
and if the Government requires our railroads to live up to the pub¬ 
lished rates, we could compel you to live up to them. 

Mr. Lovering. Do they live up to the published tariff rate? 

Mr. Walker. I believe they do. I can not see why they should 
cut it. 

Mr. Stevens. You can not compel the Hawaiian Steamship Com¬ 
pany to live up to it ? 

Mr. Walker. No, sir; they do just as they please; and we have 
been put in the same category. Of course, if the Government wants 
the traffic manager to carry freight for nothing, that could be done, 
or, on the other hand, the rates could be made prohibitive if the Gov¬ 
ernment should so decide. 

Mr. Stevens. Do you think it is just, when the Government com¬ 
pels railroads to stop preferences and live up to published tariffs, and 
to take into consideration the long and short haul matter, that the 
Government should proceed to disregard everything in its own case, 
and cut rates and give preferences? 

Mr. Walker. I think it is on that long and short haul we are 
working. It is absolutely water competition. We can not send our 
ships to sea unless they are properly loaded. They have to be prop¬ 
erly ballasted, and if I can not get freight on the spot at one price, I 
take it at another. 

Mr. Stevens. That is the way with all steamship business? 

Mr. Walker. That is so with all steamship business all Over the 
world. 

Mr. Mann. Th at used to be so with all railroad companies, and 
would be now if we did not interfere with them. 

Mr. Walker. That is the natural law of competition. The rail¬ 
roads have been very much benefited by the interstate commerce law, 
there is no doubt about that; and the public have paid a great deal 
more freight than they did when the railroads were going as they 
pleased. There is no question about that. 

Mr. Stevens. And the more we regulate the higher the rates 
will be? 

Mr. Walker. Yes, sir. 

Mr. Escii. How much of this freight that you have shipped out of 
New York to San Francisco originates right in New York, and how 
much is gathered into New York from the outer territory? 


INVESTIGATION OF PANAMA KAILWAY COMPANY. 


182 

Mr. Walker. Almost all of it comes from the factories outside. 

Mr. Esch. And within what radius? 

Mr. Walker. It is difficult to tell, because, while we absorb that 20 
cents, there are shipments made from points that have to pa} 7 higher, 
and then the difference is added to the rate. For instance, from a 
place like Amsterdam, X. Y., on certain classes of goods we are 
charged 31 cents into New York. Now, I would first take 20 per 
cent off of the rate, if it was a carload, and then 1 would absorb that 
20 cents and add the 11 cents to it, so that it really would not be 20 
per cent lower from Amsterdam to San Francisco than the trans¬ 
continental rate. 

Mr. Esch. And yet your transcontinental rate really limits? 

Mr. Walker. It is supposed to, because it is thought that unless 
a shipper can get his rate down 20 per cent lower than the railway 
rate he will not give us the business. 

Mr. Esch. Because it takes longer to ship it ? 

Mr. Walker. Yes, sir. But of .course he figures closer than I 
would. He knows the value of the goods and what the insurance on 
them would cost him, and he can figure out whether my rate would be 
to his advantage by way of .the Isthmus, or whether he had better 
pay a higher rate across the country. 

Mr. Esch. And vet in no case where you have allowed a special 
rate, as you have specified, do you permit your rate to go lower than 
$8 a ton? 

Mr. W alker. That is a matter we have agreed on with the connect¬ 
ing carrier on the other side, that we will not allow him to take 
freight from San Francisco to New York at less than $8 a ton unless 
he consults with us, and he will not allow us to take freight at a lower 
rate than that unless he gives his permission. 

Mr. Esch. Do you exercise that permission, either of you? 

Mr. Walker. It has not come up under the present contract, be¬ 
cause we have been able to keep on increasing the business, and doing 
a good business at, as I have stated, an average of $9.74 a ton, the 
lowest rate from San Francisco being $8, which is on lead. A large 
part of the business from San Francisco to New York is the wine, 
and that pays us 55 cents a hundred pounds, which would be $11. 

Mr. Shackleford. Would there be any difference in the rate of 
insurance on a cargo from New York by way of the Isthmus and one 
from New Orleans by way of the Isthmus? 

Mr. Walker. I think the underwriters would make about the same 
rate. You know they consider the ships outside of the difference in 
the voyage. Our voyage is about two days longer from here to the 
Isthmus, but our ships are larger and are a better class of boats. 

Mr. Shackleford. Suppose the case of the same class of boats, and 
loaded with the same class of cargo, out of New Orleans by way of 
the Isthmus, and out of New York by way of the Isthmus? 

Mr. Walker. 1 think if I was running the line from New Orleans 
1 would remind the underwriter that there was only five clays' risk 
instead of seven, and that he ought to give a lower rate from New 
Orleans than he gave the line from New York. 

Mr. Shackleford. Do you think he would allow that? 

Mr. Walker. I can not tell you. 

Mr. Shackleford. Is there any business that goes from New Or¬ 
leans to San Francisco by way of the Isthmus? 


183 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Walker. Xo, sir; the United Fruit Company charter Nor¬ 
wegian and English vessels, and anything they can get. Foreign 
vessels can not carry cargo from a port in the United States destined 
to another port in the United States. 

M-^nx. 1 here is nothing now to keep them from running from 
-New Orleans to the Isthmus? 

Mr. Walker. Xo, sir; but that business can not go through. They 
can not compete with the Southern Pacific. 

Mr. Mann. That is what I understand. They can not compete 
with the Southern Pacific, but there is nothing to keep them from 
shipping to the Isthmus ? 

Mr. Walker. Xo, sir; the law prevents them from shipping from 
Xew Orleans to San Francisco except in an American bottom. 

Mr. Mann. Give us some idea of the insurance rates. Of course, 
there is no insurance rate on the transcontinental railroads. 

Mr. Walker. There is a net rate by our line of about one-half of 1 
per cent from Xew York to San Francisco. I think it is nine- 
sixteenths. 

Mr. Mann. Have you any idea how much that would average per 
hundred pounds? 

Mr. IV alker. I can not tell. It changes with the value of every 
article shipped. 


Mr. Manx. I understand; but you gave us the average freight rate 
and I wondered if you had any idea of the average insurance rate. 

Mr, IV alker. I have no idea of the average value of our cargoes. 
I suppose you could find out from the reports from the custom-house, 
but I have never looked it up. 

Mr. Mann. You make the rate from Xew York to San Francisco? 

Mr. Walker. The Panama Railroad; yes, sir. I do. 

Mr. Mann. The Panama Railroad? Does the Pacific Mail make 
the rate from San Francisco to Xew York ? 

Mr. Walker. Yes, sir; they do. 

Mr. Mann. Absolutely? 

Mr. Walker. Yes, sir. We have agreed on a set of tariffs that are 
satisfactory. 

Mr. Mann. With power to modify them? 

Mr. Walker. YYs, sir. 

Mr. Shackleford. Who are “ we? ” 

Mr. Walker. Either line, reciprocally. They reduce the rate there 
when it is necessary, and we reduce the rate of freight here when il 
is necessary. 

Mr. Shackleford. You can not make a rate from San Francisco 
to Xew York? 


Mr. Walker. Xo, sir. 

Air. Shackleford. And they can not make a rate from Xew York 
to San Francisco? 

Mr. Walker. Xo, sir. 

Mr. Lovering. The rates are the same ? 

Mr. Walker. Going both ways ? 

Mr. Lovering. Yes. 

Mr. Walker. Not necessarily; no, sir. 

Mr. Mann. Even if you base your rates upon the transcontinental 
railroad rates, making so much of a discount from them, still when 
you have to reduce your rates in order to get business the rates would 
not be the same the two ways? 


184 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Walker. Not necessarily; no, sir. 

Mr. Mann. Do they make a reduction ou rates? 

Mr. Walker. The Pacific Mail ? 

Mr. Mann. Yes. 

Mr. Walker. No, sir; they publish a regular tariff rate which, on 
wine, for instance, is 55 cents a hundred pounds. Now, if I remem¬ 
ber correctly, the all-rail rate is 75 cents a hundred pounds. That 
is 20 cents a hundred pounds more, so that our rate is more than 20 
per cent less than the rate all rail, or rail and water rate via New 
Orleans. 

Mr. Mann. The Pacific Mail being controlled by the Southern 
Pacific, and the Southern Pacific being controlled by the Union 
Pacific, and then the Pacific Mail having the power to make the rate 
from San Francisco east, do you think there is any tendency to keep 
up rates on that account ? 

Mr. Walker. Well, I should suppose that that consideration would 
be in the mind of the man that makes the rates. But we had a differ¬ 
ence with the Pacific Mail four years ago, and they lost over $300,000 
as a result of that, and they do not want to have the same thing over 
again. So that they give us .just about as much freight as we have so 
far been able to handle. In other words, in 1897 their business to 
New York from San Francisco was about 12,000 tons, and all the 
persuasion we could give them would not make them increase it mate¬ 
rially until we were about to give them a notice that we would not 
go on with the contract, and so, during the last year of that contract 
they ran up to quite a respectable figure. I wanted to get up to 
about 36,000 tons a year, and after the rate war of eighteen months 
duration our two companies came together in the present contract, 
and they have taken the business and have accepted our suggestions. 
Last year the business they gave us was 30,000 tons. 

Mr. Mann. What* do you mean by “ 30,000 tons? ” 

Mr. Walker. I mean they gave us 30,000 tons of cargo from San 
Francisco to New York. 

Mr. Mann. I understood you to say a while ago that the total 
freight carried was 4-00,000 tons. 

Mr. Walker. The San Francisco business is only one-fifth of the 
business that the railroad does. 

Mr. Mann. I understood from what was said this morning that 
the percentage of that business was 55 per cent. 

Mr. Walker. You have confused the large business with Mexico 
and Central America to and from New York and Europe. 

Mr. Mann. I understood that it was stated that that was the 
amount that you got with the Pacific Mail Steamship Company? 

Mr. Walker. Yes; but the Pacific Mail- 

Mr. Mann. That is what I am asking you now, about the business 
that you get from the Pacific Mail Steamship Company. 

Mr. Walker. We were talking about San Francisco rates, as I 
understood it. 

Mr. Mann. I beg you pardon me. I did speak of the San Fran¬ 
cisco rate, but I meant the total of the business. 

Mr. Walker. Taking the whole of the business of the Isthmus, a 
very large amount of it the Pacific Mail Steamship Company brings 
to us from Central America, and it goes to Europe, and when Ave 



INVESTIGATION OF PANAMA RAILWAY COMPANY. 185 

speak of 55 per cent of the business being in connection with the 
Pacific Mail, that is 55 per cent of the Isthmus through traffic. 

Mr. Mann. Mr. Drake spoke of 55 per cent of the business in con¬ 
nection with the Pacific Mail, and in connection with Pacific coast 
points to Xew York. At least, that is what I understood. That was 
not what he meant? There is not 55 per cent of the business that 
goes around to Pacific coast points through your steamship line and 
goes up to New York? 

Mr. Walker. I do not think I follow that question. 

Mr. Mann. Mr. Drake stated that 55 per cent of the business you 
carried from Colon to New York, as I understood him- 

Mr. W vlker. With the business of the Pacific Mail connection ? 

Mr. Mann. No, sir; of the business that you carried on your steam¬ 
ship line from Colon to New York; that 55 per cent was over half of 
the total business. 

Mr. Walker. I think that in response to that Mr. Drake testified 
that 50 per cent of the through business of the railroad was done by 
the company’s own steamships, and that 55 per cent of the business 
done by the railroad was done in connection with the Pacific Mail 
Steamship Company. 

Mr. Drake. That is right. 

Mr. Walker. As a matter of fact, our business last year—the 
steamship business—was 18 per cent of the through tonnage across 
the railroad. 

Mr. Mann. What do you mean by the “ through tonnage ? ” 

Mr. Walker. Not including business between Panama and Colon—- 
the local business. 

Mr. Mann. Do you mean the business emanating from the Pacific 
Mail and ending on your line? 

Mr. Walker. No, sir; business starting with our line from station 
to station between Panama and Colon. There is quite a lot of that. 

Mr. Mann. When you say that you could not carry any more busi¬ 
ness, or that they could not furnish you any more business, the board 
of directors could pass a resolution to provide two new vessels ? 

Mr. Walker. Yes, sir. 

Mr. Mann. Was that with the view of taking care of increased 
business ? 

Mr. Walker. That was the idea. 

Mr. Manx. Or in connection with helping you out? 

Mr. Walker. The whole business of the Isthmus route can be 
increased. 

Mr. Mann. If you had two new vessels from Colon to New York, 
and made a proper rate, do you think those vessels could get all the 
business they could carry? 

Mr. Walker. Without doubt. 

Mr. Mann. If we should, in addition to that, put a line on the 
Pacific, would we get more business at a low rate or would we lose 
business by losing the Pacific Mail line ? 

Mr. Walker. If you put a line on the Pacific and run it regularly, 
you can wipe the transcontinental lines off the face of the United 
States. 

Mr. Mann. If you make the rates regular? 

Mr. Walker. You can not leave your barrels of wine on the Isth¬ 
mus over a week, in that climate, though. 



186 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Mann. You mean by handling things up to date? 

Mr. Walker. Yes, sir; and giving them thirty-six days from New 
York to San Francisco, which is pretty near as good as the Canadian 
Pacific can give, we would get a great deal more freight. 

Mr. Esch. What is the average time for freight by rail from New 
York to San Francisco? 

Mr. Walker. I do not know what the average time is. The best 
time I ever heard of, outside of green fruit, was eleven days. When 
they had yellow fever in New Orleans, and the business was driven 
away from there to the Union Pacific, those fellows got the business 
across in fourteen days, as they wanted to keep it. The Southern 
Pacific had to push pretty hard when New Orleans opened up again 
to recover the patronage, and they got their time down to eleven 
days. But I guess it is more likely to be twenty-one days than 
eleven days. I do not know what the average time is, really. 

Mr. Drake. I understand the average time is eighteen days. That 
is between the limits of eleven days and thirty-five da}^s. 

Mr. Walker. I think I heard some one say the other day, in read¬ 
ing from the contract with the Pacific Mail Steamship Company, 
that they ran three steamers a month. That is the minimum which 
they can put on. But as illustrative of their willingness to help us 
out they are running regularly once a week. Our steamer is sup¬ 
posed to reach the Isthmus on Tuesday, and the freight should go by 
the next Tuesday on their steamer on the other side, and their freight, 
due at the Isthmus on the other side Sunda} 7 , should take our steamer, 
not on Wednesday, but the next Wednesday, on our side, so as to make 
a regular service between the ports of thirty-six days. When we run 
that way there is more demand for space, because the wine merchants 
in New York.will calculate on getting, every week, so many barrels of 
wine, just enough to fill up their cellars and keep things just to their 
satisfaction, and they will not have to pay extra storage rates. 

Mr. Stevens. Can you not handle that stuff across the Isthmus in 
less than a week? 

Mr. Walker. We do when the steamers connect that way. For 
instance, we carry freight from New York to connect with the south 
carrier which should leave Panama on Thursday, and we get that 
across the Isthmus either on Thursday, or they wait until Friday to 
take it. We do a large business in that way with Ecuador. 

Mr. Stevens. So that you can make close connections? 

Mr. Walker. Yes, sir. 

Mr. Drake. We can make it in two days, with proper equipment 
and connections. 

Mr. Mann. What would be the facilities if we should run a line 
from Colon to New Orleans? 

Mr. Walker. Well, I think we would get some of the wine business, 
which is a very large traffic in New Orleans. 

Mr. Mann. Is there any possibility of your getting any portion of 
the fruit business ? 

Mr. Walker. Absolutely none. Dried fruit, do you mean ? 

Mr. Mann. I do not mean from California, but I mean from down 
there, which is now carried by the United Fruit Company’s line. 

Mr. Walker. No, sir; they do not take anything from Colon. 

Mr. Mann. They do take something from Colon, do they not ? 

Mr. Walker. Not a thing. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 187 


Mr. Mann. Do tliev not touch at Colon? 

Mr. Walker. Yes, sir. 

Mr. Mann. Do they not take up freight there? 

Mr. Walker. Xo, sir. They go off to their own plantations at 
Limon, and fill up there. 

Mr. Mann. When we were there we were told that they did. 

Mr. 'Walker. Well, they do not. That is, they do not accept any 
through freight from us. 

Mr. Drake. They did; but they do not now. 

Mr. Walker. When they wrote about the matter of the quarantine 
I asked about that, and they were not prepared to do it. 

Mr. Mann. Is there not quite a fruit belt on the Pacific side? 

Mr. W alker. On the Pacific side ? 

Mr. Mann. Yes. 

Mr. Walker. Xo, sir; the fruit belt is on the Atlantic side. 

Mr. Mann. Ton would not take that up; but is there not fruit on 
the Pacific side? 

Mr. Walker. Xo, sir; there is nothing raised there. There is no 
market* 

Mr. Mann. That is what I mean. If you had a line so that they 
could get across there, there would be a market, then ? 

Mr. Walker. You speak of fruit. 1 suppose you mean bananas, 
particularly ? 

Mr. Mann. Bananas and pineapples. 

Mr. Walker. Pineapples, I should think, would be shipped all 
right in crates; but I do not believe that bananas can be produced on 
the Pacific coast and shipped to Panama and rehandled across into 
another ship and put into Xew York at any profit. New York is 
going to get its banana supply from Port Limon and Jamaica and 
places from which it can be readily shipped. 

Mr. Mann. 1 was thinking of New Orleans, and not of New York. 

Mr. Walker. There is the same thing at New Orleans. The 
United Fruit Company are established in the banana business—that 
is their first business—and they merely take the freight down to Colon 
because that gives them a freight out. It is the same way with one of 
the lines from Europe. 

Mr. Mann. You never have considered it advisable to cater to the 
banana strip along the Panama Railroad, or to give them any reason¬ 
ably low local freight rates ? 

Mr. Walker. We have coddled that business from its inception, 
and we get less money on that than anything we handle on the line. 

Mr. Mann. I should think so, judging from the rates you have on 
it, for I must say, with due respect to your road, I never heard of such 
high tariffs as were given us down there on local rates and local 
business. 

Mr. Walker. The rate on bananas from the line of the road to 
Colon was one-quarter of a cent a pound, silver, that is, one-eighth of 
a cent a pound, gold, and you could not get that rate on any railroad 
anywhere in the United States. Somebody must have shown you, 
not the special tariff that was provided for that particular business, 
but what they call the gold tariff, which was for the transit of the 
whole Isthmus, or between points on the Isthmus, and which was 
made in 1892 to govern all traffic except the local productions of the 
Isthmus. 


188 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Mann. Now. 1 talked with a good many people down there 
about the local business, and I did not find a single one- 

Mr. Walker. Are you speaking of bananas? 

Mr. Mann. T am speaking of bananas, and other classes of business, 
too. I did not find a single person who did not make bitter complaint 
about the fact that your local rates were so high as to indicate that 
you did not care to do any local business. 

Mr. Walker. Well, the local rates- 

Mr. Mann. And I supposed if that was the case you did not care to 
be bothered about it. 

Mr. Walker. I will tell you this, that the local rates have been 
changed since you were down there. They were under discussion 
when you were there. They have been under discussion for about 
three years at least. The old ’tariff of 1892 was allowed to drift on 
because every time we went near Colombia it was a question of 
“What will you give up for this, and that, and the other thing?” 
and that old tariff needed adjustment. For instance, we carried 
liquors for about 40 cents a hundred pounds, and on groceries we 
charged $1.20 a hundred pounds. 

Mr. Esch. Silver? 

Mr. Walker. No, sir; gold. Now, if there was to be a distinction 
between the two, the liquors certainly should have paid the highest 
rate. I suppose the man who made that tariff had a partiality for 
the particular kind of traffic. I do not know what else caused it. It 
was a good while ago, and it is not in evidence, but in 1892 the local 
chamber of commerce at Panama took up the question of agriculture 
on the Isthmus, and the net silver tariff was issued. I have it here 
in this book, and I will read it if you want it. 

Mr. Mann. Take the figures that you have just given, 12 cents a 
hundred on bananas for a local rate for probably 15 miles; in con¬ 
tradistinction to that you are willing still to make a rate from New 
York to San Francisco, with the two transfers at the Isthmus, of 40 
cents. 

Mr. Walker. Not on bananas. 

Mr. Mann. Not on bananas, but on something else. I must say that 
your local rate is still high. 

Mr. Walker. A transportation line can afford to carry lead at 40 
cents a hundred pounds in a steamship, because she can be given 
nearly her full dead weight capacity of lead, and then you can pile 
in sea-island cotton on top of the lead, and it is just so much extra 
freight. 

Mr. Mann. But we are not talking about lead or sea-island cotton. 

Mr. Walker. You were speaking of my 40-cent rate between 
San Francisco and New York. That is the rate on lead. Now, I can 
put 100 tons of lead in my ship, and fill her up with everything else, 
and that makes 100 tons more of cargo than if the lead was not there. 
The lead takes up practically no room in the ship. 

Mr. Mann. But your average rate is what—a little over GO cetns? 

Mr. Walker. Yes; GO cents from here out. 

Mr. Mann. Those are average rates? 

Mr. Walker. Of course you understand that a transportation line 
can not take the lowest rate that it gets on any commodity that it 
Jiandles, and apply that to all its business. 

Mr. Adamson. You can carry 100 pounds of lead from here to the 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


189 


Isthmus as cheaply as you can carry 10 pounds of bananas across the 
1 sthmus ? 

Mi. alker. That is about the size of it. Now, as to the banana 
business on the Isthmus, what has made the particular trouble about 
that thing is the wish of the banana interests for our steamship lines 
to coddle it further. 1 hev have been at us to reduce the rates to New 
\ oilv, and I have explained to them over and over again that we can 
not afford to sacrifice our room to bananas. They want 160 feet in 
the ship for a ton of bananas, and we must pile them only 3 bunches 
high, and they must have nothing over that—all that open space, in 
order that those bananas may be in good condition. Now, I can put 4 
tons of sugar in the same room that is required for a ton of bananas, 
and Peruvian sugar would pay from $4 to $5 a ton. 

Mr. Mann. Of course you can. But it seems to me that either way 
proves that the freight rate is too high, or the freight rate is too 
low, as compared with your other rates. Do you or not want the 
business ? 

Mr. 11 alker. In the handling of corporations it has been my 
business to figure so as to get the greatest amount of revenue that 
the traffic would yield. 

Mr. Mann. Do you or not want to be bothered with the local 
business on the railroad down there? 

Mr. Walker. Yes, sir. I have tried to knock out the mules and 
the cayucas—the mules from Panama and the boats on the river 
from Colon which have largely supplied carriage to nearby towns 
along the railroad—but they are still running. That tariff went, into 
effect on the 1st of February, and where the rate was 60 cents I cut 
it down to 20 cents for a distance of 15 miles out on the road. I 
have graded the rates all across on the roads. I had partially in 
mind when I worked that tariff out an old tariff that the Georgia 
legislature put out, with which I used to be familiar, and I took the 
classifications that were in effect that we had agreed upon with the 
lines from Europe, and I took the trunk line tariff used by the great 
railroads out of New York as a guide to proper rates for light goods 
charged by weight instead of by measure, as do steamers; so that 
I could make a weight rate across the Isthmus on everything- And 
I tried to be as fair as I could to those fellows. 

Mr. Mann. You have made a very material reduction. 

Mr. Walker. Yes, sir. 

Mr. Mann. Since this committee was in the Isthmus? 

Mr. Walker. Yes; an entire change. I can not tell how it is going 
to work out on the entire distance across. 

Mr. Adamson. They told us that you charged $10 a thousand on 
lumber from Colon. Do you charge that yet? 

Mr. Walker. There are two rates on lumber. Pine lumber less 
than an inch thick is third class, and pine lumber more than an inch 
in thickness is fourth class. The fourth-class rate from Colon to 
Panama is 30 cents a hundred pounds. The new tariff makes timber 
in carloads from $3 to $5 per ton, varying with the distance. 

Mr. Adamson. $10 a thousand feet ? 

Mr. Mann. $10 a ton. 

Mr. Walker. I expect we are going to find discrepancies in this 
tariff, because I discarded the old one .and made this up by consider¬ 
ing these various tariffs that I have spoken of, and I have sent word 


190 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

to the Isthmus to draw my attention to anything which is out of the 
way in it, as we would keep the type set up, so that we could correct 
it, because I expected some classes would advance rates, and others 
would reduce them. One item that has been brought particularly to 
my attention is kerosene oil, and that rate has dropped from 80 cents 
a case to 55 cents from New York to Panama, the reduction coming- 
out of the railroad. It was made because I found that the trunk 
lines out of New York classified the oil, case oil in carload lots, as 
fourth class, and it was made fourth class, which is an illustration. 

Mr. Adamson. Is the lumber good to handle on your steamships? 

Mr. Walker. Yes; it is very good freight, if not of very great 
length. Some of that Georgia lumber is 50 feet long, and that is 
pretty bad to handle. 

Mr. Adamson. I want to get at the effect on the operation of your 
railroad company of that schedule that was enacted by the Georgia 
legislature. 

Mr. Walker. I ay as the NeAV York agent of the Central Railroad 
of Georgia for eight years, and I ay as with them for tw T enty-three 
years, and of course I dealt only with the through rates, and that 
legislation just stopped the Central Railroad of Georgia from build¬ 
ing tAvo fine ships that they had planned. They said “ If the legisla¬ 
ture is going to tell us that we must carry fertilizers for so much, 
because the farmers need them and regardless of cost of transporta¬ 
tion, we will quit.-’ That Avas the effect of it. 

Mr. Lovering. You said when you undertook to alter the schedules 
heretofore you ran up against Colombia. What do you mean by 
that ? 

Mr. Walker. Every time we Avanted to do anything, to make any 
change in existing practices, Colombia would see some reason for 
asking for some kind of a concession, saying that it must be worth 
something or other, and that Ave should pay for eA r erv change we 
wanted to make. That was the theory of it. And Ave had to notify 
the Government Avhen Ave made a change in the tariff. 

Mr. Lovering. Did you e\ r er have to pay for anything ? 

Mr. Walker. Not in connection with the tariff. I Avas not Avith 
them at the time they had paid before. 

Mr. Mann. Did you have to obtain their consent to make a reduc¬ 
tion in a tari ff rate ? 

Mr. Walker. No, sir; Ave had a right to change the tariff, but we 
gave them thirty days’ notice that it w T as changed, under the contract 
betAveen the Colombian Government and the Panama Railroad Com¬ 
pany. I forget what article it is. 

Mr. Mann. If you had a right to change the tariff, Iioav could they 
hold you up ? 

Mr. Walker. We could not change the tariff up and down just as 
Ave pleased. We could not go above some figures that had been agreed 
upon Avhen the concession was made which allowed us to through 
bill freight. 

Mr. Mann. But you could reduce the tariff ? 

Mr. Walker. We had to give the same thirty days’ notice. 

Mr. Mann. They could not hold you up if you wanted to reduce 
the tariff ? 

Mr. Walker. As I said, I. Avanted, Avhen I altered that tariff, to 
readjust it, to advance some rates and to lower other rates, to get 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 191 

tliem m a proper proportion, the rates one with the other, as we had 
in the United States. 

Mr. Manx. It will be news to this committee, which has been hear- 
mg testimony about rate legislation for a long time, to know that the 
railroad rates in the United States have a proper relation to each 

other. We have been told so often by so many people that it was 
not so. -.xi 

^ alxer. That is my experience. I have been thirty-three 
years in the transportation business now—steamships and railroads— 
and of course, the question of rates is a mere question of what the 
traffic will stand. That is the basis of getting at a rate. 

Mr. Mann. Of course. 

Mr. Walker. But you certainly do not expect to carry a pound of 
feathers for the rate of a pound of lead. The railroad rates for light 
goods are proportionately higher. They are put in higher classes 
than the heavy freight that is going in the low classes. 

Mr. Lovering. That does not hold true. 

Mr. Walker. I did not understand you, sir. 

Mr. Lovering. That does not hold true. 

Mr. W alker. Not absolutely, but that is an aim. I have always 
had a curious sort of theory on the question of freight rates that you 
would really get a just tariff by charging so much a hundred pounds 
‘for weighty goods, and a rate for space occupied by light goods, 
besides a separate additional charge, a percentage on the value of the 
goods. That is not practicable, of course, but X mean that I have 
often thought of it. 

Mr. Lovering. Suppose you were transporting cotton at a density 
of 35 pounds or 20 pounds to the cubic foot?. 

Mr. Walker. I do not think they make a difference on the rates. 

Mr. Lovering. Why should they not, on that ? 

Mr. Walker. Between compressed cotton and uncompressed 
cotton ? 

Mr. Lovering. Why should they not, under your theory ? 

Mr. Walker. They ought to, under that theory. My theory would 
correct the inequalities of that thing. 

Mr. Esch. Does the steamship company have the same right to 
make a rebate in its territory around San Francisco as you have in 
the country around New York? 

Mr. Walker. They could make the rates that way if they chose to. 

Mr. Esch. How much do they exercise that right ? 

Mr. Walker. They do not do it at all. 

Mr. Esch. Your wine all originates in San Francisco? 

Mr. Walker. Yes, sir. It either is there or shippers bring it in 
themselves. The rate, 20 per cent lower than the transcontinental 
rate, makes it 60 cents. Pacific Mail Steamship Company make it 55 
cents, which gives the wine 5 cents to get in from somewhere near by, 
or something of that sort. 

Mr. Lovering. Have you any reason to believe that the business of 
the Panama Railroad will be of any considerable proportions—will 
continue to be—after the canal is constructed or operated ? 

Mr. Walker. My feeling is that the road will do a great deal more 
business than it does now. My feeling has always been that it is 
likely to be turned into an electric traction road. 

Mr. Lovering. Will you not please state why ? 


192 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Mr. Walker. Because I think that the building of the canal on the 
isthmus is going to develop the country, and with the development 
the populace there will require facilities for getting about and moving- 
freight, and that the local tariff will keep up the road. And of 
course among the local traffic I should consider the passengers who 
go there in steamers, going through, and who will prefer to travel 
across the Isthmus by rail instead of staying on the steamer. After 
a three weeks’ voyage on a vessel T think almost anyone would like to 
take a little trip on shore, and they could go across the Isthmus in 
an hour and wait there and see Panama, which is an interesting old 
town, and get on the steamer when it came along. 

Mr. Adamson. Do you not think it will be necessary for the rail¬ 
road to do all of the local freight business? 

Mr. Walker. Yes, sir; I think so. 1 do not imagine that the busi¬ 
ness—the local business—will be allowed on the canal at all. It 
would interfere with the navigation of the canal. 

Mr. Lovering. Will there not be a great deal of freight come to 
Colon that will break bulk at that point? 

Mr. Walker. I do not know what to think about that. The canal 
is likely to change the whole course of business absolutely. I Avas 
trying to get some statistics a few years ago as to Avhat volume of 
traffic was likely to seek the canal from the United States, from the 
gulf ports, and the eastern ports, and where it Avould be distributed, 
how much of the business which iioav comes out through Mem¬ 
phis and the other gateAvays of the South to the Pacific coast and 
thence to China and Japan could be dAerted down that Avay, and in 
the search for matter I went to a statistician who placed before 
me figures made some twenty years before, and they stated that there 
Avas at that time a great deal of business in Chile that took sailing 
A^essels. It neA T er could go to the Isthmus, because of the lack of 
wind in the neighborhood of Panama, and the traffic could not afford 
to pay steamer freights. I Avas then hauling that class of freight 
from doAvn there by steamer at the rate of 40,000 tons in the year— 
sugar. Twenty years ahead a man can not tell what Avill happen. 
Here were steamers so constructed that they could carry the freight 
profitably at lower rates than sailing \ T essels Avere ready to take it at 
twenty years before. 

It seems to me that lines which now distribute traffic all along in 
the West Indies may continue just that kind of business, and I think 
the Royal Mail Steamship Company, for instance, running from 
Southampton to the West Indies, if they found 100 tons of freight 
they could take out and land at Colon, avouIc! do it. And they might 
find some freight running up and down to Valparaiso, and they 
Avould take that, and then there might be other lines established from 
New York doAvn to Valparaiso, and other lines that would go up to 
San Francisco, and it seems to me that is the natural way that busi¬ 
ness Avould change. The canal will make all-water transportation. 

Noav, I would like to say some few words on my own account, if I 
may be permitted to do so. 

The Chairman. Certainly. 

Mr. Walker. This is on the subject of the steamship line, and its 
value to the railroad, and the necessity for an office in New York, if 
the steamship line is to run. 


INVESTIGATION OF PANAMA KAILWAY COMPANY. 


193 


x During the year 1904 the tonnage moved bv the Panama Railroad 
Company was, in round numbers, 409,000 tons. Of this, 326,000 tons 
was through traffic, and our steamship line carried 48 per cent of it— 
156,000 tons. The traffic between New York and San Francisco in 
both directions was 69,565 tons. In 1897 the total traffic was only 
290,651 tons; the through traffic was 241,044 tons. The steamship 
line had 35-J per cent of it, making 85,186 tons; and business between 
New 1 ork and San Francisco was 43,864 tons. This growth I con¬ 
sider the direct result of the dominating policy which the steamship 
line enables the railroad to maintain, with a terminal in New York. 
To operate the railroad as a mere link between Colon and Panama, 
however low the rate for the transit, would be giving up all control 
of through rates and the movement of cargo from the Isthmus. 
When cargo is landed on one side of the Isthmus, steamers are not 
necessarily waiting to receive it on the other side. Some lines from 
Colon to Europe touch there but once a month, and at times these, 
and others with more frequent sailings, are unable to move accumu¬ 
lations, having filled space at previous ports of call. After years of 
controversy, we finally secured the adoption by.all lines operating via 
the Isthmus of a uniform bill of lading whicli gives us the right to 
divert cargo from the consigned line if not taken forward by the first 
steamer scheduled to sail after the cargo is ready for forwarding. 
There are eight lines to Europe which touch at Colon. Seven of these 
in recent years have joined in a conference covering their terminal 
ports, Liverpool, London, Havre, Antwerp, Southampton, Hamburg, 
Barcelona, Bordeaux, Marseille, Genoa, and territory contiguous to 
each for the purpose of placing all the ports on an equality as to 
through rates, and respecting each other's territory. It is conceiv¬ 
able that any one of these lines would refuse to receive from us 
freight consigned to another, were it not that we can now ship to 
New York by our own line, and distribute thence all over Europe. 
The Atlantic lines fear the popularity of a route via New York, so 
that the} 7 watch the situation closely and put on extra steamers when 
necessary to keep our cars, wharves, and warehouses free. The 
through tariffs are agreed upon by all at interest, the through rates 
to and from different ports on the Pacific varying directly with the 
degree of competition, particularly competition by steamers via the 
Straits of Magellan. Each carrier via the Isthmus receives fixed 
percentages of the through rates, and the right is conceded to initial 
carriers to make special rates down to fixed minima, whenever the 
exigencies of the competition require immediate action. If the rail¬ 
road fixes a set of arbitrary rates for the transit of the Isthmus, one 
of two contingencies would result: 

First , if the figures make a fair division of the through rates to and 
from ports immediately north and south of Panama, they would be 
too high for business to and from the Pacific coast of the United 
States to the north, and Chile to the south, and those countries would 
be shut off from the benefits of the Isthmus route. 

Second , if the figures are made low enough to attract business to 
and from the countries far from Panama, the through rates will not 
be affected, but the steamship companies will absorb the reduction. 
Such was the result when Mr. Charles de Lesseps inaugurated the 
policy for Central America in 1887, and it hampered the relations of 

PAN RY— 05-13 


194 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

the railroad with the connections until we broke with the Pacific Mail 
in 1900. As a matter of fact the through business passing across the 
Isthmus between the Atlantic and Pacific ports of the United States 
is only 21 per cent of the entire through business. On the remaining 
four-fifths the freights are paid by the peoples of Mexico, Central 
America, and South America at competitive rates, and I fail to see 
why we, the citizens of the United States, should propose to tax our¬ 
selves for the benefit of our neighbors when we have a valuable prop¬ 
erty in the Panama railroad and steamship line which can be devel¬ 
oped for the benefit of all at reasonable rates, and at the same time 
make earnings to offset some of the expenses• which fall upon our 
country for canal construction. It has been suggested that the three 
steamers belonging to the Panama Railroad should be leased or sold, 
the purchaser to agree to maintain a line and carry Government 
freight and passengers between New York and Colon at specified 
reasonable rates. Futhermore, that if the United States went out of 
the ocean transportation business, active competition would result to 
the Isthmus and to San Francisco, and that foreign vessels would 
compete for the way freight. The comparatively low rates between 
New York and San Francisco now forced upon the Isthmus route 
would not be attractive to American capital, except for the hope of 
combining San Francisco tonnage with other better-paying freights. 
Two lines, or one interest on both sides of the Isthmus, would have to 
make reciprocal arrangements for exchanging traffic, probabty exclud¬ 
ing connection with any other line. Regular and close connection 
is essential to San Francisco merchants. They expect shipments to 
be not more than 36 days en route. Oils and wines are seriously 
damaged by delay in the hot, moist climate of the Isthmus. 

The Panama Railroad, having relinquished all control on the ocean, 
would have no power to regulate through rates. With the present 
organization it is a simple matter to charter additional vessels on the 
Atlantic and on the Pacific, as we did in 1901, to have the power of 
absolute control. Our action at that time created a wholesome regard 
for us in all of our connections, and our views are now heard by them 
with due consideration. As we have the authority to make all through 
rates out of New York, and as the European conference lines have 
adopted the policy of making the same rates from Europe, our com¬ 
manding position as the regnlator of rates is apparent. My expe¬ 
rience of thirty-two years in the railroad and steamship business has 
always been that railroads reaching the Atlantic coast south of New 
York needed to control steamship connections to that city as an out¬ 
let, and the Panama Railroad to Colon is no exception. It would be 
a great mistake to dispose of the steamers and lose the control for 
which the company’s officers have striven so long. 

As to the chartering of foreign vessels to carry Government freight 
to Colon, we have already chartered room at favorable rates on one 
or two steamers as may be necessary to carry a large shipment of 
bulky packages which could not be transported by any of our steamers 
or by the steamships of other American lines running to the West 
Indies. The business from Europe to Colon is done by steamers 
which make many other calls about the West Indies. If the Panama 
Railroad gives up its regular service, steamship owners might find 
business profitable with Colon only in a similar manner. The direct 
service heretofore has been profitable from its concentration on one 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


195 


one. Herein has also lain the ability of the private line between 
Panama and San Francisco to obtain sufficient busihess to keep the 
steamers employed. Should several lines touch Colon, they would 
ultimately work in concert, as is done by the lines from Europe. 
The foreign steamers of the United Fruit Company from New 
Orleans, and the Leyland and the Harrison lines from Liverpool, take 
freight to Colon as an incident of their voyage to other ports for 
which outward freight is not obtainable, and where they secure more 
desirable homeward freight than can be had from Colon, where they 
load little or nothing. The result is an irregular and unsatisfactory 
passenger service to New Orleans by the United Fruit Company, 
sometimes of ten days’ duration. They make the trip to Colon in 
five days, carry Government employees at half rate, making the 
charge the same as ours from New York, which is one-third of our 
regular rate. I am confident that such a reduction by the United 
Fruit Company would not have been made except to keep pace with 
us. We encouraged the United Fruit Company to run to Colon, and 
gave them the benefit of all the arrangements for through freights 
that the Panama Railroad Company enjoys, with connections beyond 
Panama, and I think the future policy should be to give other lines 
that may be desirous of the railroad connection equal facilities, with¬ 
out, however, giving up the controlling influence to be exercised by 
the company’s steamship line. 

If the steamships are retained in service, it follows naturally that 
a wharf and office must be maintained in New York, where 48 per 
cent of the railroad’s through traffic originates or is delivered to con¬ 
signees, and where freights are prepaid and collected, except on those 
goods shipped to San Francisco, freight to be collected at destination. 
All freight to way ports is prepaid. If any office is maintained in 
the money center, and equidistant by the mails for accounting from 
San Francisco, Europe, and the Isthmus. 

Mr. Mann. Can any of you gentlemen tell me if you have in these 
hearings gone into the question of how you collect freights? 

Mr. Walker. I have not heard anyone say a word about that. 

Mr. Mann. How do you do that ? 

Mr. Walker. We collect the freight from the shipper in New York 
when we deliver a bill of lading. 

Mr. Mann. That is easy enough, of course, on freight originating 
or terminating in New York, but how abouf the other? 

Mr. Walker. In Europe our connections collect the entire freight 
from the shipper or consignee, not allowing anybody on the Pacific 
coast to handle the money of the companies, except as to passage 
money. The only exception is San Francisco. The European lines 
have arranged to send freight to San Francisco “ collect,” when it is 
desired. 

Mr. Mann. Is any of the through rate, in any event, collected on 
the Isthmus ? 

Mr. Walker. Not as a rule. There have been exceptions, when w T e 
knew a man, and for some particular reason I have asked our super¬ 
intendent to get the money from him. It is done on the Isthmus now 
for employees of the Commission. 

Mr. Mann. 1 mean on through freights? 

Mr. Walker. Oh, no; not a dollar of through freight is ever set¬ 
tled on the Isthmus. 


196 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

Mr. Mann. Not a dollar is settled there. It is all collected through 
the New York office? 

Mr. Walker. Yes, sir; the whole business of accounting and ad¬ 
justment. Freights coming from the south of Panama to New York 
are collected by us at New York, and the proportion belonging to the 
carriers south is paid to their agents in New York. 

Mr. Mann. If you had an office on the Isthmus, and attempted to 
collect freight there, you would have to collect it in the same manner 
as you do now in New York, except that it would be that much 
farther away ? 

Mr. Walker. That much farther away from the center of the 
money transaction. 

Mr. Mann. The fact that the freight goes through there would not 
make it any nearer, so far as the collection of money is concerned ? 

Mr. Walker. No, sir; you have got to have an office somewhere. 
We are doing business with half the globe, 3,000 miles from San 
Francisco, and about 3,000 miles the other way, and New York is as 
central as any place you can get. 

Mr. Mann. Mr. Drake, will you have a copy of the minutes of the 
meetings of the board of directors since the members of the Isthmian 
Canal Commission became members of the board made for us? If 
we should want a copy of the minutes of the executive committee 
for some time we will ask for it. The minutes of the board of direc¬ 
tors are not very long, and I would like to have a cop}^ of them. 

Mr. Drake. Yes, sir; I will furnish a copy. 

Mr. Mann. Will you send me tariffs? 

Mr. Walker. If you will tell me what tariffs you would like to 
have, I will get them together and send you all you want. 

Mr. Mann. Your published tariffs? 

Mr. Walker. We have a great many. This book is full of them 
[indicating scrap book]. It is a most complex thing. 

Mr. Mann. Why do you not make a tariff so that if a man wants 
to find out something,, he will not have to look it all up ? 

Mr. Walker. We do. If a man comes into the office for a tariff on 
freight to San Francisco, we give it to him. There is no use in giving 
him the tariff on freight to South America, because he does not want 
that. 

Mr. Mann. What I want is the tariffs on transcontinental busi¬ 
ness. There is no use in having the tariffs to Europe and South 
America. 

(Thereupon the committee adjourned.) 


EXTRACTS PROM ANNUAL REPORTS OF THE PANAMA RAILROAD 

COMPANY. 


[Extracts from the report of the Panama Railroad Company, 1877.] 


Statement showing number of passengers transported over the Panama Railroad for the 

years 1876 and 1877. 




1876. 

• 


18 

77. 


To Panama. 

To Aspinwall. 

To Panama. 

To Aspinwall. 

Through. 

Way. 

Through. 

Way. 

Through. 

Way. 

Through. 

Way. 

January. 

496 

458 

268 

471 

405 

479 

186 ■ 

481 

February . 

660 

546 

181 

523 

412 

532 

211 

468 

March ... 

600 

632 

432 

646 

385 

636 

279 

556 

April.. 

406 

769 

272 

772 

486 

678 

300 

553 

May. 

615 

729 

579 

704 

367 

627 

524 

516 

June. 

884 

736 

383 

838 

383 

665 

211 

590 

July. 

' 563 

610 

207 

687 

317 

556 

325 

516 

August. 

304 

452 

363 

463 

425 

634 

242 

626 

September. 

698 

373 

298 

386 

447 

631 

188 

602 

October. 

485 

463 

304 

447 

348 

715 

242 

629 

November. 

592 

275 

200 

261 

365 

642 

154 

509 

December. 

458 

434 

184 

433 

331 

810 

159 

767 

Total. 

6,161 

6,477 

3,671 

6,631 

4,671 

7,605 

3,021 

6,813 


B. Mozley, 

General Superintendent. 


Statement of earnings and expenses for the year ending December 31, 1877. 


Freight: 

From Aspinwall to Panama 
From Panama to Aspinwall 

Treasure.:. 

Mail. 


EARNINGS. 

.. $763,580.38 

.. 712, 768.44 

.. 15,957.51 

. 14, 888. 90 


Gross freight earnings. $1,507,195. 23 

Passengers: 

From Aspinwall to Panama. 99,961.35 

From Panama to Aspinwall. 67,742.90 


Gross passenger earnings. 

Miscellaneous receipts: 

Interest and exchange.. 83,504.30 

Lighterage. 130, 667. 92 

Water from Taboga and water at Aspinwall. 32, 625.93 

Leases and rents, ballast, wharfage, light dues, tele¬ 
graph, etc. 66,433.18 


167, 704. 25 


313, 231. 33 


1,988,130. 81 
197 


Total gross earnings 



























































198 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


EXPENSES. 


Interest on bonds. $209,468.19 

Subsidy to Colombian Government. 250, 000. 00 

Total expenses on the Isthmus, for lighter¬ 
age, salaries, fuel, supplies, repairs, etc.. $401,461.68 

Charges account. 19, 021. 73 

Drawback on Colombian produce. 12, 500. 07 

Lost and damaged freight. 6,562. 65 

Freight on stores. 2, 863. 98 

Office expenses in New York. 14, 569.14 

- 456,979.25 

-$916, 447. 44 


Net earnings. 1,071, 683. 37 

Note. —Previously the lighterage account has been kept separately, and only the 
net profits have been included in the reports. In the above statement the gross 
receipts of lighterage appear in the earnings, and the gross expenses per contra, thus 
accounting for an apparent increase in operating expenses. 


Treasurer's staterAent , December 31 , 1877. 


ASSETS. 


Cash in^ bank. $42, 823. 46 

Funds in England... 47,120. 00 

Due from connecting lines. 284,594.66 

Bills receivable. 300, 781. 25 

Colombian Government—advance of subsidy. 263, 538. 00 

Due from sinking fund... 56,267.30 

Investment in Panama Railroad Company stock, 900 shares. 112, 500. 00 

Petty cash. 90. 94 

Interest due...,.... 4,083. 33 


1,111,798. 94 


LIABILITIES. 


Loans . 

Drawbacks on Colombian produce 
Isthmus drafts. 


Surplus 


$150, 000. 00 
3, 500. 00 
7,149. 06 

- 160,649.06 


951,149. 88 


SINKING FUND. 


December 31, 1877. 

The bonded indebtedness of the company consists of 2,989 7 per cent sterling bonds 
of £200 each, equal to £597,800 (about $2,905,308), all due in 1897, to meet which 
the company have the following sinking fund: 


195 Panama 7 per cent ster¬ 


ling bonds, cost.$178,255.01 

Panama stock, 1,500 shares, 

cost. 153, 690. 37 

Six Pacific mail steamers... 400, 000. 00 


Due to Panama Railroad 

Company. $56, 267. 30 

Sinking fund. 675, 678. 08 


731,945.38 


731,945. 38 




































INVESTIGATION OF PANAMA RAILWAY COMPANY. 199 
[Extracts from Report of Panama Railroad Company for 1878.] 

Secretary's statement of earnings and expenses for the year ending December 31, 1878. 

EARNINGS. 

Freight: 

From Aspinwall to Panama.$889, 722.10 

From Panama to Aspin wall. 690’957 97 

On treasure.*_ 16,130*. 30 

lor mails. 12,749.55 


Gross freight earnings. $1 609, 559. 92 

Passengers: 

From Aspinwall to Panama. 81,894.28 

From Panama to Aspinwall. 68, 248. 55 

- 150,142. 83 


Gross passenger and freight earnings. 1, 759 702. 75 

Miscellaneous receipts: 

Interest and exchange. 129, 764. 21 

Lighterage... 129’ 273. 42 

Water from Taboga and water at Aspinwall. 29, 613. 54 

Leases and rents, ballast, wharfage, light dues, tele¬ 
graph, etc. 66, 505.42 

- 355,156. 59 


Total gross earnings. 2, 114, 859. 34 

EXPENSES. 

Interest on bonds. $239, 889.02 

Subsidy to Colombian Government. 250, 000. 00 

Total expenses on the Isthmus for lighterage, salaries, 

fuel, supplies, repairs, etc. 496, 932. 65 

Charges account. 13, 212. 92 

Drawback on Colombian produce.. 12, 932. 62 

Lost and damaged freight... 3, 243. 64 

Freight on stores. 2, 866. 91 

Office expenses in New York. 16,155. 52 

- 1, 035, 233. 28 


Net earnings. 1,079,626. 06 

Note. —The above item of “Total expenses on the Isthmus” includes $58,886.88 
spent for new cars, and $43,905.75 for 1,000 tons of steel rails. 

Treasurer's statement, December 31, 1878. 

ASSETS. 

Cash in bank.. $54,084. 22 

Funds in England... 47,118. 93 

Due from connecting lines.. 646,963. 95 

Bills receivable. 135,449. 25 

Colombian Government for advance of subsidy. 47, 852. 82 

Due from sinking fund. 7, 863. 46 

Investment in Panama stock, 900 shares... 112, 500. 00 

Loans on call. 115, 000. 00 

Petty cash. 110.46 

Interest due. 28,403. 29 


1,195, 346.38 










































200 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


LIABILITIES. 

$1,506. 49 
3,063. 95 

-|4 } 570. 44 


Surplus...... 1,190,775.94 

Besides the above, this company hold steamship property transferred 
to it February 1, 1878, by the Pacific Mail Steamship Company, for 
which this company issued sterling bonds amounting to £200,000, 
say. 1,000, 000. 00 


Drawbacks on Colombian produce 
Isthmus drafts. 


SINKING FUND. 

December 31, 1878. 

The bonded indebtedness of the company consists of 3,989 seven per cent sterling 
bonds of £200 each, equal to £797, 800 (about $3,877,308), of which the first 2,989 
are due in 1897, and the remaining 1,000 (issued February 1, 1878), in ten half- 
yearly payments of 100 bonds each, beginning on October 10, 1884, and ending on 
April 10, 1889. 

To meet this bonded indebtedness the company have the following sinking fund: 


195 Panama 7 per cent ster¬ 


ling bonds, cost.$178, 255. 01 

Panama stock, 1,500 shares, 

cost. 153,690. 37 

6 Pacific Mail steamers_ 400, 000. 00 


731,945. 38 


Due to Panama Railroad Com¬ 
pany . $7, 863. 46 

Sinking fund. 724,081. 92 


731,945. 38 


[Extracts from Report of Panama Railroad Company for 1879.] 
Statement of earnings and expenses for the year ending December 31, 1879. 


Earnings of the road: 

Aspinwall to Panama— 

From freight. 

From treasure .... 

From mails. 

From passengers .. 

Panama to Aspinwall— 

From freight. 

From treasure .... 

From mails. 

Froip passengers .. 


EARNINGS. 


$796, 403. 63 
3,151. 04 
8, 581.15 
75, 704. 46 


735, 250. 30 
16, 877. 52 
3, 788. 47 
67, 005. 34 


$883, 840. 28 


822,921.63 


Miscellaneous receipts: 

Interest and exchange.... 

Lighterage. 

Water supplied shipping. 

Rental of property, ballast, wharfage, light dues, tele¬ 
graph, etc. 

Old rails taken up and shipped to New York prior to 
December 31,1879. 


1,706, 761.91 


173, 321. 30 
132, 755. 85 
27, 391.29 


81,071.25 
35, 066. 32 

- 449, 605.51 


Total earnings 


2,156, 367. 42 




































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


201 


EXPENSES. 


Operating expenses on the Isthmus a . 

Lost and damaged freight. 

New York office expenses. 

Miscellaneous expenses in New York 

Total operating expenses. 

Subsidy to United States of Colombia 
Drawback on Colombian produce .. - 
Interest on bonds. 


Net earnings. 

Dividends paid during the year 


$463,168.91 
997. 23 
16, 246. 93 
24, 204. 52 


504, 617. 59 
250, 000. 00 
9, 939. 27 
270, 853.10 

-$1,035,409. 96 


. 1,120,957. 46 

. 910, 000. 00 

E. Z. Penfield, Accountant. 


Treasurer’s statement. 


ASSETS. 

Cash in bank. 

Cash in London.. 

Due from connecting steamship lines. 

Notes receivable... 

United States of Colombia, for advance of subsidy 

900 shares Panama stock (cost). 

Loans on demand. 

Petty cash. 

Accrued interest on loans. 


December 31, 1879. 

. $10,400. 27 

17,234.19 

. 542,938. 52 

. 4,165. 00 

. 56, 250. 00 

. 122, 564. 91 

. 753, 000. 00 

. 157.17 

. 4, 818. 03 


1,511,528.15 

LIABILITIES. 


Drafts advised. $4, 520. 00 

Due sinking fund. 38, 877. 03 

Unpaid bills.s.. 6, 208.14 

Accrued interest on bonds. 60,189.58 

-$109,794.75 


Surplus. 

Surplus December 31, 1878 


1,401,733.40 
1,190, 775. 94 


Increase for the year. 210,957. 46 

Besides the above, the company holds steamship property transferred 
to it 1st February, 1878, by "the Pacific Mail Steamship Company, 
for which this company issued sterling bonds amounting to £200,000, 

say..*. 1,000,000.00 

W. J. Emmet, Treasurer. 


Sinking fund. 


December 31, 1879. 


The bonded indebtedness of the company consists of 3,989 seven per cent sterling 
bonds of £200 each, equal to £797,800 (say $3,989,000) of which the first 2,989 are 
due in 1897, and the remaining 1,000, issued February 1, 1878, in ten half-yearly pay¬ 
ments of 100 bonds each, beginning on 10th of October, 1884, and ending on 10th 
April, 1889. 

To meet this bonded indebtedness the company has the following sinking fund: 


195 Panama 7 per cent sterling bonds (cost) 

1, 500 shares Panama stock (cost).. 

6 Pacific mail steamers. 

Due from Panama Railroad Company. 


$178, 255. 01 
153, 690. 37 
400, 000. 00 
38, 877. 03 


770, 822. 41 

W. J. Emmet, Secretary. 


a Includes $33,132.43 spent for 1,000 tons steel rails. 












































202 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

[Extracts from the report of the Panama Railroad Company for 1880.] 
Statement of earnings and expenses for the year ending December 31,1880. 


EARNINGS. 


Earnings of the road: 

Aspinwall to Panama— 

From freight. 

From treasure. 

From mails. 

From passengers .. 

Panama to Aspinwall— 

From freight. 

From treasure. 

From mails. 

From passengers .. 


$788, 681. 49 
1,167. 26 
8, 470. 89 
70, 900. 03 


700, 529. 50 
12, 021. 85 
3,543. 71 
77, 278. 04 


$869, 219. 67 


793, 373.10 


Miscellaneous receipts: 

Interest and exchange. 

Discount of subsidy. 

Lighterage. 

Water supplied shipping. 

* Rental of property, ballast, wharfage, light dues, tele¬ 
graph, etc. 


1,662,592. 77 


171,357. 89 
166, 666. 66 
149, 487. 51 
34, 697.50 

92, 871. 78 

-615,081.34 


Total earnings 


2, 277, 674.11 


EXPENSES. 


Operating expenses on the Isthmus a . 

Lost and damaged freight. 

New York office expenses. 

Miscellaneous expenses in New York 
Subsidy to United States of Colombia 
Drawback on Colombian produce.... 
Interest on bonds. 


608, 274. 38 
8, 66o. 52 
16,189.12 
14, 833. 43 
250, 000. 00 
6, 706. 57 
270, 746. 70 

- 1,175, 415. 72 


Net earnings 


... 1,102,258.39 

E. Z. Penfield, Accountant. 


Treasurer’s statement. 


ASSETS. 


December 31, 1880. 


Cash in bank, New York. $27,061. 93 

Cash in bank, London..... 89,165. 78 

Cash in hands of agents. 16, 408. 34 

Due from connecting steamship lines. 358, 638. 50 

Notes receivable. 5, 673. 75 

United States of Colombia, for advance of subsidy. 3,000, 000. 00 

900 shares Panama stock, cost. 122, 564. 97 

600 six per cent Panama subsidy bonds. 600, 000. 00 

Loans on demand. 346,000. 00 

Petty cash. 34. 03 

Accrued interest on loans... 2, 230.00 


4,567, 777. 30 


"Includes $52,740.05 for new equipment, $50,337.26 for 1,500 tons steel rails, and 
$49,354.89 for rebuilding bridge across Chagres. 












































INVESTIGATION OF PANAMA RAILWAY COMPANY, 


203 


LIABILITIES. 


Drafts advised. $ 1 , 440 . 00 

Due sinking fund..... 90 117 . 53 

Unpaid bills. 2, 038.’ 40 

Accrued interest on bonds .. 90,189. 58 

Six per cent subsidy bonds. 3, 000’ OOo! 00 


Besides the above, the company holds steamship prop¬ 
erty transferred to it February 1 , 1878, by the Pacific 
Mail Steamship Company, for which this company 
issued sterling bonds amounting to £ 200 , 000 , say .. 


Surplus December 31, 1879. 1,401, 733.40 

Earnings for 1880 . 1 , 102 , 258. 39 

2 503 991 79 

Dividends paid 1880]. l’ 120’ 000. 00 

Surplus December 31, 1880. 1 , 383, 991. 79 


W. J. Emmet, Treasurer. 

BONDED INDEBTEDNESS AND SINKING FUNDS. 

December 31, 1880. 

The bonded indebtedness of the company consists of: 

First, 3,989 seven per cent sterling bonds of £200 each, amounting to £797,800 
(say $3,989,000), of which the first 2,989 were issued October 10, 1867, and fall due 
October 10, 1897, and the remaining 1,000 were issued February 1 , 1878, and fall 
due in ten half-yearly payments of 100 bonds each, beginning October 10, 1884, and 
ending April 10, 1889. 

To meet this bonded indebtedness the company has the following sinking fund: 


195 Panama 7 per cent sterling bonds, cost. $178, 255.01 

1,500 shares Panama stock, cost... 153, 690. 37 

Six Pacific mail steamers... 400, 000. 00 

Due from Panama Railroad Company. 90,117. 53 


1,383,991.79 

1,000, 000. 00 


822,062. 91 

Second. 3,000 six per cent gold sinking fund subsidy bonds of $1,000 each, amount¬ 
ing to $3,000,000, were issued November 1 , 1880, and fall due November 1 , 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Govern¬ 
ment subsidy has been pledged till March 27, 1908, the same to be applied by the 
company, first, to the payment of the interest, and, second, as a cumulative sinking 
fund for the redemption of the principal; the first 600 bonds (which belong to the 
company) to be first redeemed, exhausting the sinking fund to November, 1890, and 
thereafter the bonds from 601 to 3,000 to be drawn yearly in September to an amount 
equal to the then surplus of the sinking fund, the drawn bonds to be paid on Novem¬ 
ber 1 after each drawing, and thereby redeeming the whole issue in 1908. 

W. J. Emmet, Secretary. 


[Extracts from Report of the Panama Railroad Company for 1881.] 
Statement of earnings and expenses for the year ending December 31, 1881. 


EARNINGS. 

Earnings of the road: 

Aspinwall to Panama— 

From freight. 

From treasure. 

From mails. 

From passengers. 


$1,000,406.57 
2, 534. 38 
8 , 252. 28 
113, 300.14 

-$1,124,493.37 





























204 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Earnings of the road—Continued. 
Panama to Aspinwall— 

From freight.. 

From treasure. 

From mails. 

From passengers. 


$746, 444. 32 
10, 714. 35 
3, 506. 49 
87, 448.18 


$848,113. 34' 


1,972, 606. 71 

Miscellaneous receipts: 

Interest and exchange... 94,548. 29 

Lighterage. 147, 349. 69 

Water supplied shipping. 33, 731. 81 

Rental of property, ballast, wharfage, light dues, 

telegraph, etc. 123,133.13 

- 398,762.92 


Total earnings. 2, 371, 369. 63 

EXPENSES. 

Operating expenses on the Isthmus. $478, 294. 25 

Lost and damaged freight. 6, 851. 59 

New York office expenses. 21, 203. 40 

Miscellaneous expenses in New York. 17, 243. 51 


Subsidy to United States of Colombia 

Subsidy to State of Panama. 

Redemption of subsidy bonds. 

Interest on subsidy bonds. 

Interest on sterling bonds. 

Drawback on Colombian produce_ 


523, 592. 75 
10, 000. 00 
25, 000. 00 
45, 000. 00 
180, 000. 00 
270, 603. 90 
10, 766. 95 

- 1,064,963.60 


Net earnings 


.. 1,306,406.03 

E. Z. Penfield, Secretary. 


Treasurer’s statement. 

December 31, 1881. 


ASSETS. 

Cash in bank, New York. $434, 555. 99 

Cash in bank, London. 7,138. 76 

Cash in hands of agents. 30,164. 50 

Due from connecting steamship lines. 246, 492. 39 

Note receivable.. 4, 939. 47 

United States of Colombia, for advance of subsidy. 2, 955, 000. 00 

Loans on demand... 369, 000. 00 

Petty cash. 38. 99 


4, 047, 330.10 

$1, 345. 00 
385.714. 66 
9,182.45 
89,681.96 
2, 955, 000. 00 

- 3, 440, 924. 07 


606, 406. 03 

The company’s surplus assets June 30, 1881, were sold 


for. 1, 698, 200. 00 

Earnings for 1881 . 1, 306,406. 03 


3, 004, 606. 03 

Dividends paid, 1881 . 2, 398, 200.00 


. 606, 406.03 

E. Z. Penfield, Treasurei\ 


LIABILITIES. 

Drafts advised. 

Due sinking fund. 

Unpaid bills. 

Accrued interest on bonds. 

Six per cent subsidy bonds. 


Surplus, December 31, 1881 





















































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


205 


BONDED INDEBTEDNESS AND SINKING FU&DS. 

December 31, 1881. 

The bonded indebtedness of the company consists of: 

First. 3, 989 seven per cent sterling bonds of £200 each, amounting to £797,800 
(say $3,989,000), of which the first 2,989 were issued October 10, 1867, and fall due 
October 10, 1897, and the remaining 1,000 were issued February 1, 1878, and fall due 
in ten half-yearly payments of 100 bonds each, beginning October 10, 1884, and end¬ 
ing April 10, 1889. 

To meet this bonded indebtedness the company has the following sinking fund: 


195 Panama 7 per cent sterling bonds cost.. $178, 255. 01 

555 Panama 6 per cent subsidy bonds cost. 555,000. 00 

Due from Panama Railroad Company. 385, 714. 66 


1,118,969.67 

Second. 2,955 six per cent gold sinking fund subsidy bonds of $1,000 each, amount¬ 
ing to $2,955,000, were issued November 1, 1880, and fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March 27, 1908, the same to be applied by the company, 
1 st, to the payment of the interest, and, 2d, as a cumulative sinking fund for the 
redemption of the principal, the first 555 of outstanding bonds (which belong to the 
company’s sinking fund) to be first redeemed, exhausting the subsidy sinking fund 
to November, 1890, and thereafter the bonds from 601 to 3000 to be drawn yearly in 
September to an amount equal to the then surplus of the subsidy sinking fund, the 
drawn bonds to be paid on November 1 after each drawing, and thereby redeeming 
the whole issue in 1908. 

E. Z. Pen field, Secretary. 


[Extracts from report of tjie Panama Railroad Company for 1882.] 


Statement of earnings and expenses for the year ending December 81 , 1882. 


EARNINGS. 


Earnings of the road: 

Aspinwall to Panama— 

From freight. 

From treasure. 

From mails. 

From passengers .. 

Panama to Aspinwall— 

From freight. 

From treasure_ 

From mails. 

From passengers .. 


$1,109. 487.06 
2, 638. 62 
9, 549.46 
118,411.83 


736, 271. 66 
10, 998. 03 
3, 536. 92 
105, 740. 28 


$1,240, 086.97 


856,546. 89 


2,096, 633. 86 


Miscellaneous receipts: 

Interest and exchange. 52,995. 73 

Lighterage. 156,968.81 

Water supplied shipping. 39, 432.00 

Rental of property, ballast, wharfage, light dues, 

telegraph, etc. 108,315.40 

-3o/,711.94 


Total earning: 


2,454, 345. 80 



























INVESTIGATION OF PANAMA RAILWAY COMPANY. 


206 


Operating expenses on the Isthmus. $730, 764. 42 

Lost and damaged freight... 4, 352. 04 

New York office expenses. 20, 296. 33 

Miscellaneous expenses in New York. 16, 548. .09 


771,960. 88 

Franchise tax to State of New York. 59,955. 00 

Subsidy to United States of Colombia. 10, 000. 00 

Subsidy to State of Panama. 25, 000. 00 

Redemption of subsidy bonds. 47, 000. 00 

Interest on subsidy bonds. 177, 300. 00 

Interest on sterling bonds. 271,048. 82 

Drawback on Colombian produce. 9, 545. 81 

-$1,371,810.51 


Net earnings./.. 1, 082,535. 29 


E. Z. Penfield, Secretary. 


Treasurer's statement. 

December 30, 1882. 


ASSETS. 

Cash in bank, New York. $19,147. 95 

Cash in bank, London.•. 22, 386. 81 

Cash in hands of agents. 20, 260. 04 

Due from connecting steamship lines. 272, 600. 35 

Note receivable... 125. 00 

United States of Colombia, for advance of subsidy. 2, 908,000. 00 

Loans on demand. 1, 084,182. 50 

Petty cash. 226. 43 


4, 326, 929. 08 

$4, 305. CO 
503, 443. 29 
7, 969. 89 
89, 269. 58 
2, 908, 000. 00 

- 3, 512, 987. 76 


813, 941. 32 

606, 406. 03 
1,082, 535. 29 


1,688,941.32 

Dividends paid 1882, 12k per cent. 875, 000. 00 


Surplus December 30, 1882.'. 813, 941. 32 

E. Z. Penfield, Treasurer. 

BONDED INDEBTEDNESS AND SINKING FUND. 

December 30, 1882. 

The bonded indebtedness of the company consists of: 

First, 3,989 seven per cent sterling bonds of £200 each, amounting to £797,800 
(say, $3,989,000), of which the first 2,989 were issued October 10, 1867, and fall due 
October 10, 1897, and the remaining 1,000 were issued February 1, 1878, and fall due 
in ten half-yearly payments of 100 bonds each, beginning October 10, 1884, and end¬ 
ing April 10, 1889. 

To meet this bonded indebtedness the company has the following sinking fund: 


195 Panama 7 per cent sterling bonds, cost. $178, 255. 01 

508 Panama 6 per cent subsidy bonds, cost. 508^ 000. 00 

Due from Panama Railroad Company.... 503’ 443. 29 


Surplus, December 31,1881 
Earnings for 1882. 


liabilities. 

Drafts advised.*. 

Due sinking fund. 

Unpaid bills... 

Accrued interest on bonds. 

Six per cent subsidy bonds. 


1,189, 698. 30 











































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


207 


Second. 2,908 six per cent gold sinking fund subsidy bonds of $1,000 each, amount¬ 
ing to $2,908,000, were issued November 1, 1880, and fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March 27, 1908, the same to be applied by the com¬ 
pany, first, to the payment of the interest, and second, as a cumulative sinking fund 
for the redemption of the principal; the first 508 of outstanding bonds (which belong 
to the company’s sinking fund) to be first redeemed, exhausting the subsidy sinking 
fund to November, 1890, and thereafter the bonds from 601 to 3,000 to be drawn 
yearly in September to an amount equal to the then surplus of the subsidy sinking 
fund, the drawn bonds to be paid on November 1 after*each drawing, and thereb)'" 
redeeming the whole issue in 1908. 

E. Z. Pexfield, Secretary. 


[Extracts from Report of the Panama Railroad Company for 1883.] 
Statement of earnings and expenses for the year ending December 31, 1883. 


Earnings of the road: 

. Aspinwall to Panama— 

From freight. 

From treasure. 

From mails .. 

From passengers_ 

Panama to Aspinwall— 

From freight. 

From treasure. 

From mails. 

F rom passengers... 


EARNINGS. 


$1,368, 233.11 
2, 363. 69 
9,159. 40 
188,812. 79 


$1,568, 568. 99 


683, 459. 86 
7, 037. 84 
2, 919. 53 
161, 852. 20 


855, 269. 43 


2, 423, 838. 42 


Miscellaneous receipts: 

Interest and exchange. 56,872. 61 

Lighterage. 145, 459. 79 

Water supplied shipping. 35, 206.04 

Rental of property, ballast, wharfage, light dues, 

telegraph, etc. 150,607.06 

- 388,145. 50 


Total earnings. 2,811, 983.92 


EXPENSES. 


Operating expenses on the Isthmus. 

Lost and damaged freight. 

New York office expenses. 

Miscellaneous expenses in New York. 

.. $1,002,456.22 

. 58, 283. 80 

.. 21,031.99 

. 17, 767. 71 

Franchise tax to State of New' York. 

Subsidy to United States of Colombia. 

Subsidy to State of Panama. 

Redemption of subsidy bonds. 

Interest on subsidy bonds. 

Interest on sterling bonds. 

Drawback on Colombian produce. 

1, 099, 539. 72 

. 21, 875. 00 

. 10, 000. 00 

. 25, 000. 00 

. 51,000.00 

. 174,480. 00 

. 270, 853.10 

. 7,444.43 


- 1,660,192.25 

Net earnings. 1,151,791.67 

E. Z. Penfield, Secretary , 




































208 INVESTIGATION OF 1 J A NAM A RAILWAY COMPANY. 


Treasurer’s statement. 

December 31, 1883. 

ASSETS. 


Cash in bank, New York. $566, 554. 91 

Cash in bank, London. 80, 851. 34 

Cash in hands of agents. *36, 373. 46 

Due from connecting steamship lines. 257,103. 04 

Note receivable. 15,000. 00 

United States of Colombia, for advance of subsidy. 2, 857, 000. 00 

Loans on demand. 435, 000. 00 

Petty cash. 207. 48 


4, 248, 090. 23 


LIABILITIES. 


Drafts advised. 

Due sinking fund. 

Unpaid bills. 

Accrued interest on bonds. 
Six per cent subsidy bonds 


Surplus December 30, 1882 
Earnings for 1883. 


$4, 319. 05 
274, 623, 63 
2, 654. 98 
88, 759. 58 
2, 857, 000. 00 

- 3, 227, 357. 24 


1,020, 732.99 

813, 941.32 
1,151,791.67 


1,965, 732. 99 

Ninety-fourth and ninety-fifth dividends paid 1883, 13^ 
percent. 945,000. 00 


Surplus December 31, 1883..... 1, 020, 732. 99 

E. Z. Penfield, Treasurer. 


STATEMENT OF BONDED INDEBTEDNESS AND SINKING FUNDS. 


December 31, 1883. 

The bonded indebtedness of the company consists of: 

First. 3,989 seven per cent sterling bonds of £200 each, amounting to £797,800 
(say $3,989,000), of which the first 2,989 were issued October 10, 1867, and fall due 
October 10, 1897, and the remaining 1,000 were issued February 1, 1878, and fall due 
in ten half-yearly payments of 100 bonds each, beginning October 10, 1884, and 
ending April 10, 1889. 

To meet this bonded indebtedness the company has the following sinking fund: 

195 Panama 7 per cent sterling bonds, cost. $178, 255. 01 

792 Panama 6 per cent subsidy bonds, cost. 813, 999. 34 

Due from Panama Railroad Company. 274, 623. 63 


1,266, 877.98 

Second. 2,857 six per cent gold sinking fund subsidy bonds of $1,000 each, amount¬ 
ing to $2,857,000, were issued November 1, 1880, and fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March 27, 1908, the same to be applied by the com¬ 
pany, first, to the payment of the interest, and second, as a cumulative sinking fund 
for the redemption of the principal; the first 457 of outstanding bonds (which belong 
to the company’s sinking fund) to be first redeemed, exhausting the subsidy sinking 
fund to November, 1890, and thereafter the bonds from 601 to 3,000 to be drawn 
yearly in September to an amount equal to the then surplus of the subsidy sinking 
fund, the drawn bonds to be paid on November 1 after each drawing, and thereby 
redeeming the whole issue in 1908. 

E. Z. Penfield, Secretary. 




























INVESTIGATION OF PANAMA RAILWAY COMPANY. 


209 


[Extracts from report of the Panama Railroad Company for 1884.] 
Statement of earnings and expenses for the year ending December 31 , 1884. 


Earnings of the road: 

Aspinwall to Panama— 

From freight. 

From treasure. 

From mails. 

From passengers 

Panama to Aspinwall— 

From freight. 

From treasure. 

From mails. 

From passengers .. 


EARXIXGS. 


$1, 826,554. 55 
4, 301.06 
10, 720. 07 
251, 820.12 


866, 524. 57 
7, 621. 93 
3, 521.29 
191,266. 62 


$2, 093, 395. 80 


1,068, 934.41 


3,162, 330.21 


Miscellaneous receipts: 

Interest.. 6, 695. 81 

Lighterage. 146, 221. 96 

Water supplied shipping. 36, 580. 25 

Rental of property, ballast, wharfage, light dues, 

telegraph, etc... 142,947 92 

- 332,445. 94 


Total earnings. 3,494, 776.15 

EXPEXSES. 

Operating expenses on the Isthmus. 1,689, 797. 70 

Lost and damaged freight.. 11,127. 03 

New York office expenses. 24, 801. 78 

Miscellaneous expenses in New York. 17,650.05 


1, 743, 376. 56 
23, 625.00 
10, 000. 00 
25, 000. 00 
53, 000. 00 
171,420. 00 
271,107. 62 
8, 703. 40 
12, 719. 90 

- 2, 318, 952. 48 


Net earnings. 1,175,823.67 

E. Z. Penfield, Secretary. 


Franchise tax to State of New York.. 
Subsidy to United States of Colombia 

Subsidy to State of Panama. 

Redemption of subsidy bonds. 

Interest on subsidy bonds. 

Interest on sterling bonds. 

Drawback on Colombian produce. 

Exchange. 


Treasurer 1 s statement. 


assets. 


December 31, 1884. 


Cash in bank, New York. $568, 412. 49 

Cash in hands of agents. 79,188. 86 

Due from connecting steamship lines. 308,138. 21 

Note receivable... 131. 25 

United States of Colombia for advance of subsidy. 2, 804, 000. 00 

Loans on demand. 560, 000. 00 

Petty cash. 109.11 


pan ry —05-14 


4, 319,979. 92 












































210 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


LIABILITIES. 


Drafts against London bankers in excess of letter 

advice of deposits. 

Isthmus drafts advised. 

Due sinking fund...*. 

Unpaid bills.. 

Accrued interest on bonds. 

Six per cent subsidy bonds. 


$55, 282. 45 
5, 719. 81 
272,143. 40 
18, 048. 02 
88, 229. 58 
2, 804, 000. 00 


1,076, 556. 66 


Surplus December 31, 1883. 1, 020, 732. 99 

Earnings for 1884 . 1,175, 823. 67 


2,196, 556. 60 

Ninety-sixth and ninety-seventh dividends paid 1884, 

16 per cent. 1,120, 000. 00 

Surplus December 31, 1884. 1,076,556. 66 

E. Z. Penfield, Treasurer. 


STATEMENT OF BONDED INDEBTEDNESS AND SINKING FUNDS. 

December 31, 1884. 

The bonded indebtedness of the company consists of: 

First. 3,889 seven per cent sterling bonds of £200 each, amounting to £777,800 
(say $3,889,000), of which the first 2,989 were issued October 10, 1867, and fall due 
October 10, 1897, and the remaining 900 w T ere issued February 1, 1878, and fall due 
in nine half-yearly payments of 100 bonds each, beginning April 10, 1885, and 
ending April 10, 1889. 

To meet this bonded indebtedness the company has the following sinking fund: 


195 Panama 7 per cent sterling bonds, cost. $178, 255. 01 

774 Panama 6 per cent subsidy bonds, cost. 798,150. 83 

Due from Panama Railroad Company. 272,143. 40 


1,248, 549. 24 

Second. 2,804 six per cent gold sinking fund subsidy bonds of $1,000 each, 
amounting to $2,804,000, were issued November 1, 1880, and fall due November 1, 
1910. 

To meet this bonded indebtedness $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March 27, 1908, the same to be applied by the com¬ 
pany, first, to the payment of the interest, and, second, as a cumulative sinking fund, 
for the redemption of the principal; the first 404 of outstanding bonds (which belong 
to the company’s sinking fund) to be first redeemed, exhausting the subsidy sinking 
fund to November, 1890, and thereafter the bonds from 601 to 3,000 to be drawn 
yearly in September to an amount equal to the then surplus of the subsidy sinking 
fund, the drawn bonds to be paid on November 1 after each drawing, and thereby 
redeeming the whole issue in 1908. 

E. Z. Penfield, Secretary. 


[Extracts from report of the Panama Railroad Company for 1885.] 
Statement of earnings and expenses for the year ending December SI, 1885. 

earnings. 

Earnings of the road: 

Aspinwall to Panama— 

From freight... $1, 728, 798. 57 

From treasure. 4, 040. 25 

From mails. . 16,198. 60 

From passengers. 197, 268. 64 


$1,946,306.06 


























INVESTIGATION OF PANAMA RAILWAY COMPANY. 


211 


Earnings of the road—Continued. 

Panama to A spin wall— 

From freight. $793, 549. 29 

From treasure. 8, 963. 60 

From mails. 3 , 286. 05 

From passengers. 186, 722.11 


Miscellaneous receipts: 

Interest and exchange. 14, 825.16 

Lighterage. 125,138. 52 

Water supplied shipping. 41, 738.16 

Rental of property, ballast, wharfage, light dues, 
telegraph, etc. 147,393. 91 


$992, 521.05 


329,095. 75 


Total earnings 


3, 267,922. 86 


EXPENSES. 


Operating expenses on the Isthmus. . 2, 591, 063. 56 

Lost and damaged freight. 14, 726.07 

New York office expenses. 24,118.19 

Miscellaneous expenses in New York. 25, 364. 91 


2, 655,272. 73 


Subsidy to United States of Colombia. 10,000. 00 

Subsidy to State of Panama. 25, 000.00 

Redemption of subsidy bonds. 57, 000. 00 

Interest on subsidy bonds. 168, 240. 00 

Interest on sterling bonds.. 260, 766. 65 

Drawback on Colombian produce. 6,522. 61 

Interest.. 13,511.31 

-3,196,313.30 


Net earnings 


Treasurer’s statement. 


ASSETS. 

Cash in bank, New York... 

Cash in bank, London. 

Cash in hands of agents. 

Due from connecting, steamship lines. 

Note receivable. 

United States of Colombia for advance of subsidy 

Demand loan.. 

Petty cash. 


. 71,609.56' 

E. Z. Penfield, Secretary. 

December 31, 1885. 

. $138,146. 81 

. 71, 833. 74 

. 164, 419. 79 

. 244, 994. 77 

. 718.75 

. 2, 747, 000. 00 

. 130,000. 00 

. 157.92 


3, 497, 271. 78 

LIABILITIES. 


Isthmus drafts advised 

Due sinking fund. 

Unpaid bills. 

Accrued interest on bonds . 
Six per cent subsidy bonds 


$10,499.05 
207,975. 21 
498.40 
83,132. 90 
2, 747, 000. 00 

- 3,049,105.56 


448,166. 22 

Surplus December 31, 1884.. 1,076, 556. 66 

Earnings for 1885 . 71, 609. 56 


1,148,166. 22 

Ninety-eighth and ninety-ninth dividends paid 1885, 

10 per cent. 700,000.00 

Surplus December 31, 1885.. 448,166. 22 

E. Z. Penfield, Treasurer. 


















































212 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


STATEMENT OF BONDED INDEBTEDNESS AND SINKING FUNDS. 

December 31, 1885. 

The bonded indebtedness of the company consists of: 

First, 3,689 seven per cent sterling bonds of £200 each, amounting to <£737,800 
(say $3,689,000), of which the first 2,989 were issued October 10, 1867, and fall due 
October 10, 1897, and the remaining 700 were issued February 1, 1878, and fall due 
in seven half-yearly payments of 100 bonds each, beginning April 10, 1886, and end¬ 
ing April 10, 1889. 

To meet this bonded indebtedness the company has the following sinking fund: 


195 Panama 7 per cent sterling bonds, cost. $178, 255. 01 

717 Panama 6 per cent subsidy bonds, cost. 741,150. 83 

• Due from Panama Railroad Company... 207, 975. 21 


1,127, 381.05 

Second. 2,747 six per cent gold sinking-fund subsidy bonds of $1,000 each, amount¬ 
ing to $2,747,000, were issued November 1, 1880, and fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Government 
subsidy was pledged till March 27,1908, the same to be applied by the company first 
to the payment of the interest, and, second, as a cumulative sinking fund for the 
redemption of the principal; the first 347 of outstanding bonds (which belong to the 
company’s sinking fund) to be first redeemed, exhausting the subsidy sinking fund 
to November, 1890, and thereafter the bonds from 601 to 3000 to be drawn yearly 
in September to an amount equal to the then surplus of the subsidy sinking fund, the 
drawn bonds to be paid on November 1 after each drawing, and thereby redeeming 
the -whole issue in 1908. 

E. Z. Penfield, Secretary . 


[Extracts from report of the Panama Railroad Company for 1886.] 
Statement of earnings and expenses for the year ending December 31 , 1886. 


EARNINGS. 

Earnings of the road: 


Aspinwall to Panama— 

From freight. $1, 432, 940. 03 

From treasure. 4,168. 78 

From mails.. 18, 031. 78 

From passengers. 250, 543. 30 


Panama to Aspinwall— 

From freight. 644, 850.18 

From treasure. 10, 897. 85 

From mails. 3, 011.10 

From passengers. 233, 878. 90 


Miscellaneous receipts: 

Interest and exchange. 66,057.48 

Lighterage. 147, 804. 06 

Water supplied shipping. 32, 311. 07 

Rental of property, ballast, wharfage, light dues, 
telegraph, etc... 207,065. 26 


$1, 705, 683. 89 


892, 638. 03 


453, 237. 87 


Total earnings.. 3,051, 559. 79 


EXPENSES. 


Operating expenses on the Isthmus. 2, 345, 010. 26 

Lost and damaged freight. 8, 045. 90 

New York office expenses. 24, 274. 60 

Miscellaneous expenses in New York. 28, 869. 20 


2, 406,199. 96 

Subsidy to United States of Colombia. 10,000.00 





























INVESTIGATION OF PANAMA RAILWAY COMPANY. 


213 


Subsidy to State of Panama. 

Redemption of subsidy bonds 

Interest on subsidy bonds. 

Interest on sterling bonds. 

Drawback on Colombian produce 
Interest. 


Net earnings 


$25,000. 00 
60,000. 00 
164, 820. 00 
247, 242. 72 
10,534. 52 
9,181.39 

-$2,932,978.59 


. 118,581.20 

E. Z. Penfield, Secretary. 


Treasurer's statement. 

December 31, 1886. 


ASSETS. 

Cash in bank, New York. $7 192.62 

■ Cash in bank, London. 34^483.38 

Cash in hands of agents. 105’ 499. 49 

Due from connecting steamship lines. 423’ 576. 87 

United States of Colombia for advance of subsidy. 2 , 687,’ 000 . 00 

Loans on demand. 265 000 . 00 

Petty cash..' ’ 19 ] 33 


3,522,771.62 

LIABILITIES. 


Isthmus drafts advised ... 

Due sinking fund. 

Unpaid bills.. 

Accrued interest on bonds 
Six per cent subsidy bonds 


$31, 256. 65 
138, 617.10 
19, 635. 38 
79,515.13 
2, 687, 000. 00 

- 2, 956,024. 26 


566, 747.42 

Surplus December 31, 1885.. 448,166. 22 

Earnings for 1886 . 118, 581. 20 


Surplus December 31, 1886 


. 566, 747. 42 

E. Z. Penfield, Treasurer. 


STATEMENT OF BONDED INDEBTEDNESS AND SINKING FUNDS. 


December 31, 1886. 

The bonded indebtedness of the company consists of: 

First. 3,489 seven per cent sterling bonds of £200 each, amounting to €697,800 (say 
$3,489,000), of which the first 2,989 were issued October 10, 1867, and fall due Octo¬ 
ber 10 , 1897, and the remaining 500 were issued February 1 , 1878, and fall due in five 
half-yearly pavments of 100 bonds each, beginning April 10, 1887, and ending April 
10, 1889. 

To meet this bonded indebtedness the company has the following sinking fund: 


195 Panama 7 per cent sterling bonds, cost. $178, 255. 01 

657 Panama 6 per cent subsidy bonds, cost. 681,150. 83 

Due from Panama Railroad Company... 138, 617.10 


998, 022. 94 

Second. 2,687 six per cent gold sinking fund subsidy bonds of $1,000 each, amount¬ 
ing to $2,687,000, were issued November 1 , 1880, and fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March 27,1908, the same to be applied by the company, 
first, to the payment of the interest, and second, as a cumulative sinking fund, for the 
redemption of the principal; the first 287 of outstanding bonds (which belong to the 
company’s sinking fund) to be first redeemed, exhausting the subsidy sinking fund 
to November, 1890, and thereafter the bonds from 601 to 3000, to be drawn yearly 
in September to an amount equal to the then surplus of the subsidy sinking fund, the 
drawn bonds to be paid on November 1 after each drawing, and thereby redeeming 
the whole issue in 1908. 

E. Z. Penfield, Secretary. 


































214 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


[Extracts from report of Panama Railroad Company for 1887.] 
Statement of earnings and expenses for the year ending December 81, 1887. 


EARNINGS. 


Earnings of the road: 

A spin wall to Panama— 

From freight.$1, 626, 468. 68 

From treasure. 11,200.49 

From mails. 17, 260. 79 

From passengers. 324, 236.17 


Panama to A spin wall— 

From freight. 798,140. 03 

From treasure. 19,015.18 

From mails. 2, 414. 09 

From passengers. 201, 366. 27 


Miscellaneous receipts: 

Interest and exchange. 52,106.04 

Lighterage. 174,150.69 

Water supplied shipping. 38, 749. 95 

Rental of property, ballast, wharfage, light dues, 
telegraph, etc. 224,474.10 


$1,979,166.13 


1,020, 935.57 


489, 480. 78 


Total earnings 


3, 489, 582. 48 


EXPENSES. 


Operating expenses on the Isthmus. 2, 291,953. 94 

Lost and damaged freight. 6, 267.17 

New York office expenses... 24, 929. 57 

Miscellaneous expenses in New York. 25, 317. 02 


2, 348, 467. 70 


Subsidy to United States of Colombia. 10, 000. 00 

Subsidy to State of Panama_*. 25, 000. 00 

Redemption of subsidy bonds. 64, 000. 00 

Interest on subsidy bonds. 161, 220. 00 

Interest on sterling bonds. 233, 379. 27 

Drawback on Colombian produce. 22, 744. 90 

Interest. 4, 939. 24 


2, 869, 751.11 


Net earnings 


619,831. 37 


E. Z. Penfield, Secretary. 


Treasurer ’ s statement. 


December 31, 1887. 


ASSETS. 


Cash in bank, New York. $10, 223.99 

Cash in bank, London.... 36, 868. 23 

Cash in hands of agents. 1, 670. 72 

Notes receivable. 75, 600. 00 

Dues from connecting steamship lines. 386, 512. 24 

United States of Colombia for advance of subsidy. 2, 623,000. 00 

Loans on demand. 840, 000.00 

Petty cash. 212. 49 


3, 974, 087. 67 











































INVESTIGATION OE PANAMA RAILWAY COMPANY. 


215 


LIABILITIES. 

Isthmus drafts advised. 

Due sinking fund. 

Unpaid bills. 

Accrued interest on bonds. 

Six per cent subsidy bonds. 


$22,475. 73 
66, 052. 84 
122. 95 
75, 857. 36 
2, 623, 000. 00 

-$2, 787, 508. 88 


1,186,578. 79 

Surplus December 31, 1886. 566, 747. 42 

Earnings for 1887 . 619, 831. 37 


Surplus December 31, 1887. 1,186,578. 79 

E. Z. Penfield, Treasurer. 


STATEMENT OF BONDED INDEBTEDNESS AND SINKING FUNDS. 

December 31, 1887. 

The bonded indebtedness of the company consists of— 

First. 3,289 seven per cent sterling bonds of £200 each, amounting to £657,800 (say 
$3,289,000), of which the first 2,989 were issued October 10,1867, and fall due October 
10, 1897, and the remaining 300 were issued February 1, 1878, and fall due in three 
half-yearly payments of 100 bonds each, beginning April 10, 1888, and ending April 
10, 1889. 

To meet this bonded indebtedness the company has the following sinking fund: 


195 Panama 7 per cent sterling bonds, cost. $178, 255. 01 

593 Panama 6 per cent subsidy bonds, cost. 617,150. 83 

Due from Panama Railroad Company. 66, 052. 84 


861,458.68 

Second. 2,623 six per cent gold sinking fund subsidy bonds of $1,000 each amount¬ 
ing to $2,623,000 were issued November 1, 1880, and fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March 27,1908, the same to be applied by the company, 
first, to the payment of the interest, and second, as a cumulative sinking fund, for 
the redemption of the principal; the first 223 of outstanding bonds (which belong to 
the company’s sinking fund) to be first redeemed, exhausting the subsidy sinking 
fund to November, 1890, and thereafter the bonds from 601 to 3,000, to be drawn 
yearly in September to an amount equal to the then surplus of the subsidy sinking 
fund, the drawn bonds to be paid on November 1, after each drawing, and thereby 
redeeming the whole issue in 1908. 

E. Z. Penfield, Secretary. 


[Extracts from report of the Panama Railroad Company for 1888.] 
Statement of earnings and expenses for the year ending December 31, 1888. 


EAHNINGS. 


Earnings of the road: 

A spin wall' to Panama— 

From freight. 

From treasure. 

From mails. 

From passengers .. 

Panama to Aspinwall— 

From freight. 

From treasure. 

From mails. 

From passengers .. 


$1,621,131.00 
13, 087. 32 
19, 463. 05 
319, 523. 99 

-$1, 973, 205. 36 

652, 764. 59 
19,095.72 
2,466. 72 
243,921. 83 


918, 248. 86 




























216 


INVESTIGATION OF PANAMA RAILWAY COMPANY 


Miscellaneous receipts: 

Interest and exchange. $17,149. 08 

Lighterage. 210,000.52 

Water supplied shipping. 58, 701. 36 

Rental of property, ballast, wharfage, light dues, 

telegraph, Fox River shops, etc... 513, 354. 03 

* r -$799.204.99 


Total earnings 


3,690, 659.21 


EXPENSES. 


Operating expenses on the Isthmus. 1, 751, 618. 75 

Fox River shops. 215, 823. 23 

Lost and damaged freight. 7, 632. 86 

New York office expenses. 31,296. 88 

Miscellaneous expenses in New York. 29,665. 71 


2, 036, 037.43 


Subsidy to United States of Colombia 

Subsidy to State of Panama. 

Redemption of subsidy bonds. 

Interest on subsidy bonds. 

Interest on sterling bonds... 

Drawback on Colombian produce.... 


10 , 000 . 00 
25, 000. 00 
68, 000. 00 
157, 380. 00 
219, 998. 73 
23, 698. 60 

- 2,540,114.76 


Net earnings 


. 1,150,544.45 

Ernest L. Oppenheim, 

Secretory. 


Treasurer's statement. 


CURRENT ASSETS. 


December 31, 1888. 


Cash in bank, New York.... $112, 207.11 

Cash in bank, London. 35,577. 50 

Cash in hands of agents. 47, 296. 22 

Notes receivable. 500.00 

Uncollected earnings. 272, 325. 57 

United States of Colombia, for advance of subsidy. 2, 555, 000. 00 

Loans on demand. 100, 000. 00 

Petty cash. 30. 58 

Due from sinking fund... 29, 739. 73 

Amount on deposit with comptroller State of New York. 3, 326. 67 

Cash in bank, New York—Isthmus draft account. 2, 457. 03 


3, 158, 460. 41 


CURRENT LIABILITIES. 


Isthmus drafts advised.... 

Unpaid bills. 

Accrued interest on bonds 
Six per cent subsidy bonds 


$16, 871.58 
5, 698. 65 
72,159.57 
2, 555,000. 00 

- 2,649,729.80 


Excess of assets 


508, 731.61 


Surplus December 31, 1887, as per balance. 1, 702, 638. 91 

Surplus December 31, 1888, as per balance . 1.236, 847. 36 


Decrease of surplus 


465, 791.55 



















































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


217 


The following dividends were paid during the year ending December 31, 1888: 
Dividend No. 100, paid January 16, 6 per cent/ 

Dividend No. 101, paid Mav 1, 5 pei* cent. 

Dividend No. 102, paid September 12, 7 per cent. 

Dividend No. 103, paid November 30, 4 per cent. 

Dividend No. 104, paid December 21, 1 per cent. 

Ernest L. Oppenheim, 

Treasurer. 

STATEMENT OF BONDED INDEBTEDNESS AND SINKING FUNDS. 


December 31, 1888. 

The bonded indebtedness of the company consists of: 

First. 3,089 seven per cent sterling bonds of £200 each, amounting to £617,800 
(say 83,089,000), of which the first 2,989 were issued October 10, 1867, and fall due 
October 10, 1897, and the remaining 100 were issued February 1, 1878, and fall due 
April 10, 1889. 


To meet this bonded indebtedness the company has the following sinking fund: 

195 Panama 7 per cent sterling bonds, valuation. $195, 000. 00 

543 Panama 6 per cent subsidy bonds, valuation. 543,000.00 


738, 000. 00 

Less amount due Panama Railroad Company. 29, 739. 73 


708, 260. 27 

Second. 2,555 six per cent gold sinking fund subsidy bonds of $1,000 each, amount¬ 
ing to $2,555,000, were issued November 1, 1880, and fall due November 1, 1910. 

To meet this bonded indebtedness $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March 27, 1908, the same to applied by the company, 
first, to the payment of the interest, and, second, as a cumulative sinking fund, for 
the redemption of the principal; the first 155 of outstanding bonds (which belong 
the company’s sinking fund) to be first redeemed, exhausting the subsidy sinking 
fund to November, 1890, and thereafter the bonds from 601 to 3,000 to be drawn 
yearly in September to an amount equal to the then surplus of the subsidy sinking 
fund, the drawn bonds to be paid on November 1 after each drawing, and thereby 
redeeming the whole issue in 1908. 

Ernest L. Oppenheim, 

, Secretary. 


[Extracts from report of the Panama Railroad Company for 1889.1 
Statement of earnings <tnd expenditures for the year ending December 31, 1889. 


Earnings of the road: 

Aspinwall to Panama— 

From freight. 

From treasure. 

From mails. 

From passengers .. 


earnings. 


$1,018, 725.19 
2,179.75 
24, 799.42 
108, 201.57 

-$1,153,905.93 


Panama to Aspinwall— 

From freight. 516,851. 45 

From treasure. 13, 058. 87 

From mails.:- 3,105. 22 

From passengers. 112,807. 71 

- 645,823.25 

Miscellaneous receipts: 

Interest and exchange. 19, 506. 50 

Lighterage. 201,711.10 

Water supplied shipping. 35,064. 00 

Rental of property, ballast, wharfage, light dues, 

telegraph, etc. 101,814. 62 

s 1 - 358,096.22 


Total earnings 


2,157, 825. 40 

























218 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


EXPENDITURES. 


Operating expenses on the Isthmus--- 

Lost and damaged freight. 

Drawback on Colombian produce. 

New York office expenses. 

Miscellaneous expenses in New York- 

Total expenses. 

Leaving net earnings. 

From which deduct: 

Appropriation to sinking fund. 

Subsidy to United States of Colombia 

Redemption of subsidy bonds. 

Interest on subsidy bonds. 

Interest on sterling bonds. 


Surplus earnings 


$1,127,152. 66 
7, 486. 26 
11,965.10 
87, 662. 57 
48, 224. 04 


$1, 232, 490. 63 


925, 334.77 


75,000. 00 
35, 000. 00 
71, 000. 00 
153, 300. 00 
206, 885. 08 

- 541,185.08 


384,149. 69 


Ernest L. Oppenheim, 

Secretary. 


Comparative statement of earnings and, expenses for the years 1888 and 1889. 


Gross earnings, 1888. $3, 690, 659. 21 

Gross earnings, 1889. 2,157, 825. 40 

Decrease (41.53 per cent).. 1,532, 833. 81 


Operating expenses, 1888 .. 2, 059, 736. 03 — 55.81 per cent of gross earnings. 

Operating expenses, 1889 . 1,232, 490. 63 = 57.12 per cent of gross earnings. 


Decrease (40.16 per cent).. 827,245. 40 


Net earnings, 1888. 1,630, 923.18 = 44.19 per cent of gross earnings. 

Net earnings, 1889. 925, 334. 77 = 42.88 per cent of gross earnings. 


Decrease (43.26 per cent).. 705, 588. 41 


Ernest L. Oppenheim, 

Secretary. 


Treasurev’s statement . 


December 31, 1889. 


CURRENT ASSETS. 


Cash in bank, New York. $12, 594. 50 

Cash in bank, London. 48, 079. 42 

Cash in hands of agents. 8, 232. 54 

Deposited with trust companies. 220,000. 00 

Balance on deposit with comptroller State of New York. 311. 91 

Uncollected earnings.,,. 138, 289. 41 

Petty cash.... 171. 61 

Accrued interest on deposits. 586.30 

Due from sinking fund. 7,103. 58 

Coal and supplies on hand. 237, 880. 08 

United States of Colombia for advance of subsidy. 2,484,000.00 


3,157, 249. 35 







































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


219 


CURRENT LIABILITIES. 


Isthmus drafts. 

Miscellaneous accounts unpaid 

Coupons not presented. 

Accrued interest on bonds_ 

Due United States of Colombia 
Six per cent subsidy bonds.... 


$68,513. 81 
14,357.28 , 

1,530. 00 
69, 940. 69 
18, 750. 00 
2, 484,000. 00 

-$2,657,091. 78 


Excess of assets. 500,157.57 

Surplus, December 31, 1888, as per balance —. 1,400,458.19 

Surplus, December 31, 1889, as per balance. 1,229, 607. 88 


Decrease of surplus 


170, 850.31 


The following dividends were paid during the year ending December 31, 1889: 
Dividend No. 105 paid March 6, 5 per cent. 

Dividend No. 106, paid July 31, 4 per cent, 

Ernest L. Oppenheim, 

Treasurer. 


STATEMENT OF BONDED INDEBTEDNESS AND SINKING FUND. 

December 31, 1889. 

The bonded indebtedness of the company consists of: 

First. 2, 989 seven percent sterling bonds of £200 each, amounting to £597,800 
(say $2,989,000), which were issued October 10, 1867, and fall due October 10, 1897. 
To meet this bonded indebtedness the company has the following sinking fund: 


219 Panama 7 per cent sterling bonds, valuation. $219, 000. 00 

472 Panama 7 per cent subsidy bonds, valuation. 472,000. 00 

41 six per cent railway mortgage bonds, cost. 42,233. 75 


733, 233. 75 

Less amount due Panama Railroad Company. 7,103.58 


726,130.17 

Second. 2,484 six per cent gold sinking fund subsidy bonds of $1,000 each, amount¬ 
ing to $2,484,000, were issued November 1, 1880, and fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March, 27, 1908, the same to be applied by the com¬ 
pany, first, to the payment of the interest, and second, as a cumulative sinking fund, 
for the redemption of the principal; the first 84 of outstanding bonds (which belong 
to the company’s sinking fund) to be first redeemed, exhausting the subsidy sinking 
fund to November, 1890, and thereafter the bonds from 601 to 3,000, to be drawn 
yearly in September to an amount equal to the then surplus of the subsidy sinking 
fund, the drawn bonds to be paid on November 1 after each drawing, and thereby 
redeeming the whole issue in 1908. 

Ernest L. Oppenheim, 

Secretary. 


[Extracts from report of the Panama Railroad Company for 1890.] 

Statement of * arnings and expenditures for the year ending December 31, 1890. 


Earnings of the road: 

A spin wall to Panama— 

From freight. 

From treasure. 

From mails. 

From passengers .. 


earnings. 


$955, 683. 49 
2, 425.74 
22,995. 21 
57, 350. 81 


$1,038, 455. 25 




























220 


INVESTIGATION OE PANAMA RAILWAY COMPANY. 


Earnings of the road—Continued. 
Panama to Aspinwall— 

From freight. 

From treasure... 

From mails. 

From passengers. 


$491, 691. 97 
18, 796. 42 
3,472. 29 
57, 237. 83 


Miscellaneous receipts: 

Interest and exchange. 5, 754. 08 

Lighterage. 219, 680. 61 

Water supplied shipping. 34,927. 95 

Rental of property, ballast, wharfage, light dues, tele¬ 
graph, etc. 79, 800. 99 


$571,198. 51 


340,163. 63 


Total earnings 


1, 949, 817. 39 


EXPENDITURES. 


Operating expenses on the Isthmus. 917, 954. 76 

Lost and damaged freight. 7, 949. 38 

Drawback on Colombian produce. 10, 634.14 

New York office expenses. 39, 955. 83 

Miscellaneous expenses in New r York: Legal expenses, 
judgments, agency charges, etc. 61,456. 36 


Total expenses 


1,037,950. 47 


Leaving net earnings. 

From which deduct— 

Appropriation to sinking fund . 100, 000. 00 

Subsidy to United States of Colombia. 35, 000. 00 

Redemption of subsidy bonds. 76, 000. 00 

Interest on subsidy bonds.... 149, 040. 00 

Interest on sterling bonds. 202, 953.10 


911,866. 92 


562, 993.10 


Surplus earnings.. 348, 873. 82 

E. A. Drake, Secretary pro tern. 

Comparative statement of earnings and expenses for the years 1889 and, 1890. 

Gross earnings, 1889. $2,157, 825. 40 

Gross earnings, 1890. 1, 949, 817. 39 

Decrease (9.63 per cent). 208, 008. 01 

Operating expenses, 1889. 1, 232, 490. 63=57.12 per cent of gross earnings. 

Operating expenses, 1890. 1,037, 950.47 =53.23 per cent of gross earnings. 

Decrease (15.78 per cent)_ 194,540.16 


Net earnings, 1889. 925, 334. 77=42.88 per cent of gross earnings. 

Net earnings, 1890. 911, 866. 92=46.76 per cent of gross earnings. 

Decrease (1.45 per cent). 13, 467. 85 

E. A. Drake, Secretary pro tern. 


Treasurer’s statement. 

CURRENT ASSETS. 


December 31, 1890. 


Cash in bank, New York. $26, 826. 91 

Cash in bank, London (£11,372 13s. lOd. at $4.85 the company’s rate ). 55’ 157^ 56 

Cash in hands of agents.1. 47 , 827. 34 

Deposited with trust companies. 120,’ 000. 00 

Uncollected earnings (partly estimated). 153,950. 43 

Petty cash. ’ 184 .42 

















































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


2L>1 


Accrued interest on deposits. $176. 71 

Coal and supplies on hand. 197 , 073.04 

United States of Colombia for advance of subsidy. 2,408*000. 00 


3, 009,196. 41 

CURRENT LIABILITIES. 


Isthmus drafts. $39, 280.69 

Miscellaneous accounts unpaid. lo’ 984.17 

Coupons not presented. 1, 440 . 00 

Accrued interest on bonds. 69,180. 66 

Due United States of Colombia. 18, 750. 00 

Six per cent subsidy bonds. 2, 408, 000. 00 

Due to sinking fund. 21,161.12 


2,568, 796. 64 


Excess of assets 


440,399. 77 


Surplus December 31, 1890, as per balance. 1, 362. 952. 86 

Surplus December 31, 1889, as per balance. 1,229, 607. 88 

Increase of surplus. 133, 344.98 


The following dividends were paid during the year ending December 31, 1890: 
Dividend No. 107, paid March 27, 3£ per cent. 

Dividend No. 108, paid December 16, 1| per ceiit. 

E. A. Drake, Treasurer pro tern. 


STATEMENT OF BONDED INDEBTEDNESS AND SINKING FUND. 


December 31, 1890. 

The bonded indebtedness of the company consists of: 

First. 2,989 seven per cent sterling bonds of £200 each, amounting to £597,800 
(say $2,989,000), which were issued October 10, 1867, and fall due October 10, 1897. 
To meet this bonded indebtedness the company has the following sinking fund: 


219 Panama 7 per cent general mortgage sterling bonds, valuation ... $249,000. 00 

411 Panama 6 per cent subsidy bonds, valuation.. 411,000. 00 

100 six per cent railway bonds (50 first mortgage, 50. second mort¬ 
gage), cost. 100,932.25 

100 five per cent railway consolidated mortgage bonds, cost. 92, 520. 84 


853, 453. 09 

Due from Panama Railroad Company. 21,161.12 


874,614. 21 

Second. 2,408 six per cent gold sinking fund subsidy bonds of $1,000 each, amount¬ 
ing to $2,408,000, were issued November 1, 1880, and fall due November 1, 1910. 

To meet this bonded indebtedness $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March 27, 1908, the same to be applied by the com¬ 
pany, first to the payment of the interest, and second, as a cumulative sinking fund, 
for the redemption of the principal; the first 8 numerically of outstanding bonds 
(,which belong to the company’s sinking fund) to be first redeemed, exhausting the 
subsidy sinking fund to November, 1890, and thereafter the bonds from 601 to 3,000 
to be drawn yearly in September to an amount equal to the then surplus of the sub¬ 
sidy sinking fund, the drawn bonds to be paid on November 1 after each drawing, 
and thereby redeeming the whole issue in 1908. 

E. A. Drake, Secretary pro tern. 




























222 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


[Extracts from report of the Panama Railroad Company for 1891.] 

Statement of earnings and expenditures for the year ending December 31, 1891. 

EARNINGS. 

Earnings of the road: 

Aspinwall to Panama— 

From freight. $919, 307.13 

From treasure. 2, 346. 84 

From mails. 23, 631. 62 

From passengers. 52, 884. 03 


Panama to Aspinwall— 

From freight. . 481, 832. 87 

From treasure. 14, 731. 31 

From mails... 3, 610. 73 

From passengers. 62,694.72 

Miscellaneous receipts: 

Interest and exchange. 5, 833. 34 

Lighterage. 238,601.94 

Water supplied shipping. 42,565. 86 

Rental of property, ballast, wharfage, light, dues, 
telegraph, etc. 83,073. 38 


$998,169. 62 


562, 869. 63 


370, 074. 52 
5, 888. 40 


Collections in excess of “ estimated ” earnings for previous years. 

Total earnings. 1, 937,002.17 


EXPENDITURES. 


Operating expenses on the Isthmus. 870,199.04 

Lost and damaged freight. 7, 088. 38 

Drawback on Colombian produce . 10, 773. 23 

New York office expenses. 39, 391. 52 

Miscellaneous expenditures in New York; legal expenses, 
judgments, agency charges, etc.... 47,316.07 


Total expenses. 974, 768. 24 


Leaving net earnings. 962, 233. 93 

From which deduct: 

Appropriation to sinking fund. 175, 000. 00 

Subsidy to United States of Colombia. 35, 000. 00 

Redemption of subsidy bonds. 81, 000. 00 

Interest on subsidy bonds. 144,480. 00 

Interest on sterling bonds. 202,953.10 

- 638, 433.10 


Surplus earnings. 323, 800. 83 

Ernest L. Oppenheim, Secretary. 

Comparative statement of earnings and expenses for the years 1890 and 1891. 

Gross earnings, 1890.$1,949, 817. 39 

Gross earnings, 1891 . 1, 937, 002.17 

Decrease (0.65 per cent)_ 12,815.22 

Operating expenses, 1890 . 1, 037, 950. 47=53.23 per cent of gross earnings. 

Operating expenses, 1891 . 974, 768. 24=50.32 per cent of gross earnings. 

- » 

Decrease (6.08 per cent)_ 63.182. 23 

Net earnings, 1890. 911, 866. 92=46.77 per cent of gross earnings. 

Net earnings, 1891. 962, 233. 93=49.68 per cent of gross earnings. 

Increase (5.52 per cent)_ 50, 367. 01 

Ernest L. Oppenheim, Secretary. 
















































INVESTIGATION OF PANAMA RAILWAY COMPANY. 

Condensed balance sheet, December 31, 1891. 


223 


ASSETS. 


Cost of road and equipment.$9,835,320.73 

Real estate at Isthmus. 263,616.74 

Material on hand. 232,023.46 

Uncollected earnings (partly esti¬ 
mated)...'.. 127,118.48 

Accounts receivable. 15,509.30 

Sinking fund. 1 ,108,554.63 

Cash on hand in New York. 176,973.38 

Cash on hand in London... 22,799.54 

Cash on hand in Isthmus agency .. 20,303.81 

Accrued interest on deposits ... 1... 2,316.20 

Advance of subsidy to United States 
of Colombia... 2,327,000.00 


14,131,536.27 

To surplus December 31. 1891. 1,580,694.-11 


LI ABILITIES. 


Capital stock.$7,000,000.00 

General mortgage 7 per cent bonds. 2,989,000.00 

Subsidy 6 per cent bonds. 2.327,000.00 

Fund for redemption of subsidy 

bonds.*. 56,570.00 

Accrued interest on bonds. 68,370.66 

Isthmus drafts unpresented. 48,417.84 

Overdue coupons. 1,200.00 

Unclaimed dividends. 149.00 

Balances due deceased or missing 

employees. 894.70 

Due department of Panama. 18,750.00 

Due to connecting companies. 21,584.19 

Accounts payable. 6,561.98 

Due sinking fund. 12,343.79 

Surplus December 31,1890. 1,362,952.86 

Addition to surplus for year 1891... 217,741.25 


14,131,536.27 


Ernest L. Oppeniieim, Secretary. 


Treasureds statement. 


December 31, 1891. 

CURRENT ASSETS. 


Cash in bank, New York. 

Cash in bank, London (£4,700 18s. 8d., at $4.85, the company’s rate).. 

Cash in hands of agents... 

Deposited with trust companies. 

Uncollected earnings (partly estimated). 

Petty cash. 

Accrued interest on deposits. u . 

Coal and supplies on hand. 

United States of Colombia for advance of subsidy. 


$26, 965. 91 
22, 799. 54 
20, 303. 81 
150, 000. 00 
127,118.48 
7.47 
2, 316. 20 
232, 023. 46 
2, 327, 000. 00 


2, 908, 534. 87 


CURRENT LIABILITIES. 


Isthmus drafts. 

Miscellaneous accounts unpaid 

Coupons not presented. 

Accrued interest on bonds_ 

Due United States of Colombia 
Six per cent subsidy bonds.... 
Due to sinking fund. 


$48, 417. 84 
18, 765. 52 
1,200. 00 
68, 370. 66 
18, 750. 00 
2, 327, 000. 00 
12, 343. 79 

- 2, 494, 847. 81 


Excess of assets. 413, 687. 06 

Surplus December 31, 1891, as per balance. 1,580,694.11 

Surplus December 31, 1890, as per balance. 1, 362, 952. 86 

Increase of surplus. 217, 741.25 


The following dividends were paid during the year ending December 31, 1891: 
Dividend No. 109, paid March 27, 2 per cent. 

Dividend No. 110, paid December 29, 3 per cent. 

Ernest L. Oppeniieim, Treasurer. 


























































224 


INVESTIGATION OP PANAMA RAILWAY COMPANY. 


STATEMENT OF BONDED INDEBTEDNESS AND SINKING FI ND. 

December 31, 1891. 

The bonded indebtedness of the company consists of: 

First. 2,989 seven per cent sterling bonds of -£200 each, amounting to £597,800 
(say, $2,989,000), which were issued October 10, 1867, and fall due October 10,1897. 
r 4o meet this bonded indebtedness the company has the following sinking fund: 


273 Panama 7 per cent general mortgage sterling bonds, valuation- $273, 000. 00 

409 Panama 6 per cent subsidy bonds, valuation. 409, 000. 00 

100 six per cent railway mortgage bonds, cost. 101,080. 00 

260 five per cent railway mortgage bonds, cost. 231, 567. 09 

100 four per cent railway mortgage bonds, cost. 81, 563. 75 


Due from Panama Railroad Company 


1,096, 210. 84 
12, 343. 79 


1,108,554.63 

Second. 2,327 six per cent gold sinking fund subsidy bonds of $1,000 each, amount¬ 
ing to $2,327,000, were issued November 1, 1880, and fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March 27,1908, the same to be applied by the company, 
first, to the payment of the interest and, second, as a cumulative sinking fund for 
the redemption of the principal, the bonds to be drawn yearly in September to an 
amount equal to the then surplus of the subsidy sinking fund, the drawn bonds to be 
paid on November 1 after each drawing, and therebv redeeming the whole issue 
in 1908. 

Ernest L. Oppenheim, Secretary. 


[Extracts from the Report of the Panama Railroad Company for 1892.] 
Statement of earnings and expenditures for the gear ending December SI, 1892. 


EARNINGS. 


Earnings of the road: 

Aspinwall to Panama— 

From freight. $754,147. 53 

From treasure. 1, 680. 09 

From mails... 22, 828.10 

From passengers... 50,023.21 


Panama to Aspinwall— 

From freight. 

From treasure. 

From mails. 

From passengers... 

Miscellaneous receipts: 

Interest and exchange. 

Lighterage,... 

Water supplied shipping. 

Rental of property, ballast, wharfage, light 
telegraph, etc._. 


535, 

600. 79 

13, 

393. 66 

4, 

134. 07 

54, 

184.32 

1) 

276. 47 

213, 

677. 73 

44, 

138. 06 

68, 

165. 21 


Collections in excess of “estimated’’ earnings for previous year 


$828, 678. 93 


607, 312. 84 


330, 257. 47 
2,495.15 


Total earnings 


1, 768, 744. 39 



























INVESTIGATION OF PANAMA RAILWAY COMPANY 


225 


EXPENDITURES. 


Operating expenses on the Isthmus. $848,985. 83 

Lost and damaged freight... 9 597.46 

Drawback on Colombian produce. 13* 326.13 

New York office expenses. 42 ’ 461. 60 

Miscellaneous expenditures in New York: Legal expenses, 
judgments, agency charges, etc. 33,983. 87 


Total expenses 


$948,354. 39 


Leaving net earnings. 820, 390. 00 

From which deduct: 

Appropriation to sinking fund . 175,000.00 

Subsidy to United States of Colombia. 35, 000. 00 

Redemption of subsidy bonds. 85, 000. 00 

Interest on subsidy bonds. 139, 620. 00 

Interest on sterling bonds. 202,953.10 

- 637,573.10 


Surplus earnings. 182, 816. 90 


Ernest L. Oppenheim, 

Secretary. 


Comparative statement of earnings and expenses for the years 1891 and 1892 . 


Gross earnings, 1891. $1, 937, 002.17 

Gross earnings, 1892. 1,768,744.39 


Decrease (8. 69 per cent)_ 168, 257. 78 

Operating expenses, 1891 . 974, 768. 24=50. 32 per cent of gross earnings. 

Operating expenses, 1892 . 948, 354. 39=53. 61 per cent of gross earnings. 

Decrease (2. 70 per cent)_ 26,413. 85 


Net earnings, 1891. 962, 233. 93=49. 68 per cent of gross earnings. 

Net earnings, 1892. 820, 390. 00=46. 39 per cent of gross earnings. 


Decrease (14. 74 per cent)... 141, 843. 93 

Ernest L. Oppemheim, 

Secretary. 

Condensed balance sheet, December 31, 1892. 


ASSETS. 


Cost of road and equipment.$10,205,320. 73 

Real estate at Isthmus. 263,616. 74 

Material on hand. 180,288.91 

Uncollected earnings (partly esti¬ 
mated) . 133,535.85 

Accounts receivable. 17,684.58 

Sinking fund. 1,351,825.22 

Cash on hand in New York. 162,929.34 

Cash on hand in London. 25,850.28 

Cash on hand in Isthmus agency.. 27,114.86 

Due from Isthmus agency. 8,286.93 

General European agents. 516.89 

Accrued interest on deposits. 157.49 

Advance of subsidy to United States 

of Colombia.'. 2,242,000.00 

General mortgage 7 per cent ster¬ 
ling bonds in treasury. 651,000.00 

Due by sinking fund. 96,648.12 


15,366,775.94 

To surplus December 31, 1892. 1,736,781.60 


LIABILITIES. 


Capital stock. $7,000,000.00 

General mortgage 7 per cent bonds. 4,000,000.00 

Subsidy 6 per cent bonds. 2,242,000.00 

Fund for redemption of subsidy 

bonds. 56,950.00 

Accrued interest on bonds. 74,515.54 

Isthmus draftsunpresented. 39,746.13 

Overdue coupons. 840.00 

Unclaimed dividends. 149.00 

Balances due deceased or missing 

employees. 894.70 

Due department of Panama. 18,750.00 

Due Colombian Government. 10,000.00 

Due connecting companies. 2,530.92 

Accounts payable. 2,939.16 

Bills payable. 180,000.00 

Miscellaneous accounts unpaid_ 678.89 

Surplus December 31, 1891. 1,580,694.11 

Addition to surplus for year 1892... 156,087.49 


15,366, 775. 94 


Ernest L. Oppenheim, 

Secretary. 


pan ry— 05-15 
































































226 


INVESTIGATION OF PANAMA RAILWAY COMPANY 


Treasurer's statement. 


December 31, 1892. 


CURRENT ASSETS. 


Cash in bank, New York. 

Cash in bank, London (£5,329 19s. Id. at $4.85, the company’s rate).. 

Cash in hands of agents. r . 

Deposited with trust companies. 

Uncollected earnings (partly estimated). 

Petty cash. 

Accrued interest on deposits. 

Coal and supplies on hand. 

United States of Colombia for advance of subsidy. 

Sinking fund. 

Due from Isthmus agency. 


$47, 790. 40 
25, 850. 28 
27, 631. 75 
115, 000. 00 
133, 535. 85 
138. 94 
157. 49 
180, 288. 91 
2^ 242, 000. 00 
96, 648.12 
8, 286. 93 


2, 877, 328. 67 


CURRENT LIABILITIES. 


Isthmus drafts. 

Miscellaneous accounts unpaid 

Coupons not presented. 

Accrued interest on bonds 
Due department of Panama ... 
Due Government of Colombia. 
Six per cent subsidy bonds.... 


$39, 746.13 
169, 508. 09 
840. 00 
74, 515.54 
18, 750. 00 
10, 000. 00 
2, 242,000. 00 

- 2, 555, 359. 76 


Excess of assets. 321,968.91 

Surplus December 31, 1892, as per balance. 1, 736, 781. 60 

Surplus December 31, 1891, as per balance. 1, 580, 694.11 

Increase of surplus. 156,087. 49 


The following dividends were paid for the year ending December 31, 1892: 
Dividend No. Ill, paid March 28, 2 per cent. 

Dividend No. 112, paid January 3, 1893, 2 per cent. 

Ernest L. Oppenheim, 

Treasurer. 


statement qf bonded indebtedness and sinking fund. 


December 31, 1892. 

The bonded indebtedness of the company consists of: 

First. 4,000 seven per cent sterling bonds of £200 each, amounting to £800,000 
(say, $4,000,000), of which 2,989 were issued October 10, 1867, and fall due October 
10,1897. The remaining 1,011 were issued on the 10th of October, 1892, and fall due 
on the 10th of October, 1897, but by resolution of the board of directors the holder 
is given the option of having them extended for ten years, at 5 per cent per annum, 
to the 10th day of October, 1907, the company reserving to itself the right of redemp¬ 
tion at 105 and accrued interest of such extended bonds, at any date subsequent to 
the 10th day of October, 1902. Of this latter issue 651 bonds are in the company’s 
treasury. 

To meet this bonded indebtedness the company has the following sinking fund: 


633 Panama seven per cent general mortgage sterling bonds, valuation. 

393 Panama six per cent subsidy bonds, valuation. 

100 six per cent railway mortgage bonds, cost. 

2.70 five per cent railway mortgage bonds, cost. 

100 four per cent railway mortgage bonds, cost. 


$633, 000. 00 
393, 000. 00 
101,080. 00 
239, 829. 59 
81,563. 75 


Due Panama Railroad Company 


1, 448, 473. 34 
96, 648.12 


1,351, 825. 22 




































INVESTIGATION OF PANAMA RAILWAY COMPANY. 227 


* S ® C0 J?£‘ 2,242 six P er cent S old sinking fund subsidy bonds of $1,000 each, amount¬ 
ing to $2,242,000, were issued November 1, 1880, and fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March 27, 1908, the same to be applied by the com¬ 
pany, first, to the payment of the interest, and, second, as a cumulative sinking fund, 
tor the redemption of the principal; the bonds to be drawn yearly in September to 
an amount equal to the then surplus of the subsidy sinking fund, the drawn bonds 
to be paid on November 1 after each drawing, and thereby redeeming the whole 
issue in 1908. 

Ernest L. Oppenheim, 

Secretary. 


[Extracts from Report of the Panama Railroad Company for 1893.] 
Statement of earnings and expenditures for the year ending December 31, 1893. 


EARNINGS. 

Earnings of the road: 

Colon to Panama— 

From freight.$553, 665. 89 

From treasure. 2,543. 83 

From mails. 29, 253. 98 

From passengers... 37, 470. 67 


Panama to Colon— 

From freight. 368, 799. 81 

From treasure. 14,507.31 

From mails. 5, 337. 54 

From passengers. 35,433. 76 


Miscellaneous receipts: 

Lighterage. 219,067. 31 

Water supplied shipping. 44, 711.15 

Rental of property, ballast, wharfage, light dues, 
telegraph, etc. 103,335.47 


$622, 934. 37 


424, 078. 42 


367,113. 93 


Total earnings 


1,414,126. 72 


EXPENDITURES. 


Operating expenses on the Isthmus. 783, 041. 24 

Lost and damaged freight. 1,859. 57 

Drawback on Colombian produce. 14, 351. 09 

New York office expenses. 41, 854. 78 

Interest and exchange. 3, 889. 00 

Miscellaneous expenditures in New York: Legal expenses, 
judgments, agency charges, etc. 71, 765. 70 


Total expenses. 916, 761. 38 


Leaving net earnings.,. 497, 365. 34 

From which deduct: 

Expenses steamer Saturn, voyage to Panama. 23, 775.47 

Susidy to United States of Colombia. 35, 000. 00 

Redemption of subsidy bonds. 90, 000. 00 

Interest on subsidy bonds. 133, 650. 00 

Interest on sterling bonds. 233,508.10 

- 515,933. 57 


Deficit. 18,568. 23 


E. A. Drake, Secretary . 





































228 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Comparative statement of earnings and expenses for the years 1892 and 1893. 

Gross earnings, 1892 . $1,768, 744. 39 

Gross earnings, 1893 . 1, 414,126. 72 


Decrease (20.04 per cent) ... 354, 617. 67 

Operating expenses, 1892. 948, 354. 39=50.32 per cent of gross earnings. 

Operating expenses, 1893. 916, 761. 38=64.82 per cent of gross earnings. 


Decrease (3.33 per cent). 31, 593. 01 

Net earnings, 1892. 820, 390. 00=49.68 per cent of gross earnings. 

Net earnings, 1893. 497, 365. 34=35.18 per cent of gross earnings. 


Decrease (39.37 percent)_ 323,024.66 

E. A. Drake, Secretary. 


Condensed balance sheet, December 31, 1893. 


ASSETS. 


Cost of road and equipment. S10,215,320. 73 

Real estate at Isthmus. 263,616. 74 

Material on hand.:. 169,322.99 

Uncollected earnings (partly esti¬ 
mated). 80,967.67 

Accounts receivable. 18,648.14 

Sinking fund. .. 1,436,189.22 

Cash on hand in New York. 177,051.32 

Cash on hand in London. 22,888.24 

Cash on hand in Isthmus agency.. 30,204.73 

Due from Isthmus agency. 4,855.81 

General European agents. 2,094.35 

Accrued interest on deposits. 1,306.94 

Advance of subsidy to United 

States of Colombia. 2,152,000.00 

General mortgage 7 per cent ster¬ 
ling bonds in treasury . 471,000.00 

Due by sinking fund. 17,284.12 

Advances to Panama R. R. Com¬ 
pany’s steamers. 115,131.38 


15,177,882.38 

To surplus Dec. 31, 1893. 1,793,350.42 


LIABILITIES. 


Capital stock.$7,000,000.00 

General mortgage 7 per cent bonds. 4,000,000.00 

Subsidy 6 per cent bonds. 2,152,000.00 

Fund for redemption of subsidy 

bonds. 57,430.00 

Accrued interest on bonds. 74, 768.69 

Isthmus drafts unpresented. 40,549.13 

Overdue coupons. 1,710.00 

Unclaimed dividends. 149.00 

Balances due deceased or missing 

employees. 894.70 

Due Department of Panama. 18,750.00 

Due connecting companies. 32,513.86 

Accounts payable. 2,441.24 

Miscellaneous accounts unpaid_ 3,325.34 

Corrected surplus, Dec. 31, 1892 _ 1,717,554.65 

Addition to surplus for year 1893 ... 75,795.77 


15,177,882.38 


E. A. Drake, Secretary. 


Treasurer's statement. 


December 31, 1893. 

CURRENT ASSETS. 


Cash in bank, New York.i. $51, 910. 31 

Cash in bank, London (£4,719 19s. Id. at $4.85, the company’s rate).. 22, 888. 24 

Cash in hands of agents. 32, 299. 08 

Deposited with trust companies. 125, 000. 00 

Uncollected earnings (partly estimated). 80,967. 67 

Petty cash. 141.01 

Accrued interest on deposits.. 1, 306. 94 

Coal and supplies on hand. 169, 322. 99 

United States of Colombia for advance of subsidy. 2,152, 000. 00 

Sinking fund.... 17, 284.12 

Due from Isthmus agency. . 23, 358. 66 


2, 676, 479. 02 

























































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


229 


CURRENT LIABILITIES. 

Isthmus drafts. 

Miscellaneous accounts unpaid. 

Coupons not presented. 

Accrued interest on bonds.. 

Due Department of Panama.. 

Six per cent subsidy bonds. 


$40, 549.13 
21,629.58 
1, 710. 00 
74, 768. 69 
18, 750. 00 
2,152,000.00 

-$2, 309, 407. 40 


Excess of assets..... 367,071.62 

Surplus December 31, 1893, as per balance. 1, 793,350. 42 

Corrected surplus December 31, 1892, as per balance. 1,717,554. 65 


Increase of surplus... 75, 795. 77 

Ernest L. Oppenheim, Treasurer. 

Statement of bonded indebtedness and sinking fund. 


December 31, 1893. 

The bonded indebtedness of the company consists of: 

First. 4,000 seven per cent sterling bonds of £200 each, amounting to £800,000 
(say $4,000,000), of which 2,989 were issued October 10, 1867, and fall due October 10, 
1897. The remaining 1,011 were issued on the 10th of October, 1892, and fall due 
on the 10th of October, 1897, but by resolution of the board of directors the holder 
is given the option of having them extended for ten years, at 5 per cent per annum, 
to the 10th day of October, 1907; the company reserving to itself the right of redemp¬ 
tion at 1905 and accrued interest of such extended bonds at any date subsequent to 
the 10th day of October, 1902. Of this latter issue 471 bonds are in the company’s 
treasury. 

To meet this bonded indebtedness the company has the following sinking fund: 
663 Panama seven per cent general mortgage sterling bonds, valuation . $663,000. 00 


368 Panama six per cent subsidy bonds, valuation. 368, 000. 00 

100 six per cent railway mortgage bonds, cost. 101,080. 00 

270 five per cent railway mortgage bonds, cost. 239, 829. 59 

100 four per cent railway mortgage bonds, cost.. 81,563. 75 


Due Panama Railroad Company 


1,453,473.34 
17, 284.12 


1,436,189. 22 

Second. 2,152 six per cent gold sinking fund subsidy bonds of $1,000 each, amount¬ 
ing to $2,152,000, were issued November 1, 1880, and fall due November 1, 1910. 

To meet this bonded indebtedness $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March 27, 1908, the same to be applied by the com¬ 
pany, first, to the payment of the interest, and second, as a cummulative sinking fund 
for the redemption of the principal; the bonds to be drawn yearly in September to 
an amount equal to the then surplus of the subsidy sinking-fund, the drawn bonds 
to be paid on November 1 after each drawing, and thereby redeeming the whole 
issue in 1908. 

Ernest L. Oppenheim, Treasure!'. 


[Extracts from Report of the Panama Railroad Company for 1894.] 
Statement of earnings and expenditures for the year ending December 31, 1894 • 

EARNINGS. 

Earnings of the road: 

Colon to Panama— 

From freight.$574,807.91 

From treasure.•-. 6,516. 62 

From mails. 29, 648. 53 

From passengers. 31,431. 54 


$642, 404. 60 































230 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Earnings of the road—Continued. 
Panama to Colon— 

From freight. 

From treasure. 

From mails. 

From passengers. 


$370, 582. 42 
10, 801.56 
4, 835. 30 
27, 909. 89 


$414,129.17 


Miscellaneous receipts: 

Interest and exchange... 1, 510. 41 

Lighterage. 213,590.41 

Water supplied shipping. 42, 365. 38 

Rental of property, ballast, wharfage, light dues, tele¬ 
graph, etc.-. 62,285. 77 

—-319, 751.97 


Total earnings 


1, 376, 285. 74 


EXPENDITURES. 


Operating expenses on the Isthmus. 631, 986. 30 

Lost and damaged freight. 2, 657. 94 

Drawback on Colombian produce. 16, 716. 52 

New York office expenses. 44,179. 37 

Miscellaneous expenditures in New York. 18, 206. 91 

Legal expenses and judgments. 24, 240. 06 

Agency charges. 7,105. 94 


Total expenses 


745, 093. 04 


Leaving net earnings. 631,192. 70 

From which deduct: 

Subsidy to Republic of Colombia. 35, 000. 00 

Redemption of subsidy bonds. 97, 000. 00 

Interest on subsidy bonds. 129,120. 00 

Interest on sterling bonds. 239, 619.10 

- 500, 739.10 


Surplus 


. 130,453. 60 

E. A. Drake, Secretary. 


Comparative statement of earnings and expenses for the years 1893 and 1894. 


Gross earnings, 1893. $1, 414,126. 72 

Gross earnings, 1894. 1, 376, 285. 74 

Decrease (2.67 per cent)_ 37, 840. 98 

Operating expenses, 1893. $916, 761. 38=64. 82 per cent of gross earnings. 

Operating expenses, 1894. 745,093. 04=54.14 per cent of gross earnings. 

Decrease (18.72 per cent)... 171, 668. 34 

Net earnings, 1893 ... $497, 365. 34=35.18 per cent of gross earnings. 

Net earnings, 1894 . 631,192. 70=45. 86 per cent of gross earnings. 


Increase (26.91 per cent) ... 133, 827. 36 


E. A. Drake, Secretary . 










































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


231 


Condensed balance sheet, December 31, 1894. 


ASSETS. 


Cost of road and equipment. $10,225,320.73 

Real estate at Isthmus. 263,616.74 

Material on hand. 117,801.54 

Uncollected earnings (partly esti¬ 
mated)... 105,245.73 

Accounts receivable. 95,372.02 

Sinking fund. 1,514,821. 58 

Cash on hand in New York. 188,975.32 

Cash on hand in London. 28,458.57 

Cash on hand in Isthmus agency.. 11,479.33 

Due from Isthmus agency.... 23,177.24 

General European agents. 3.838.39 

General agents, New York. 1,190.38 

General agents, San Francisco_ 177.06 

Accrued interest on deposits. 1,261.09 

Advance of subsidy to Republic of - 

Colombia..'. 2,055,000.00 

General mortgage 7 per cent ster¬ 
ling bonds in Treasury. 471.000.00 

Advances to Panama Railroad Com¬ 
pany’s steamers. 211,229.62 


15 317 965 34 

To surplus December 4.1894. l’ 885’ 176. 69 


LIABILITIES. 


Capital stock. $7,000,000.00 

General mortgage bonds. 4,000,000.00 

Subsidy 6 per cent bonds. 2,055,000.00 

Fund for redemption of subsidy 

bonds. 56,310.00 

Accrued interest on bonds. 73,798.69 

Isthmus drafts unpresented. 31,853.73 

Overdue coupons. 3,300.00 

Unclaimed dividends. 149.00 

Balances due deceased or missing 

employees. 894.70 

Due department of Panama. 18,750.00 

Due connecting companies. 26,203.90 

Accounts payable. 702.40 

Miscellaneous accounts unpaid_ 6,914.24 

Due sinking fund. 158,911.99 

Corrected surplus, December 31, 

1893. 1,797,884.04 

Addition to surplus for year 1894 .. 87,292.65 


15,317,965. 34 


E. A. Drake, Secretary. 


Treasurev* s statement. 


December 31, 1894. 

CURRENT ASSETS. 


Cash in bank, New York. $63, 795. 96 

Cash in bank, London (£5,867 14s. lid. at $4.85, the company’s rate). 28,458.57 

Cash in hands of agents. 16, 685.16 

Deposited with trust companies. 125, 000. 00 

Uncollected earnings (partly estimated). 105, 245. 73 

Petty cash. 179. 36 

Accrued interest on deposit. 1, 261. 09 

Coal and supplies on hand. 117, 801. 54 

Republic of Colombia for advance of subsidy. 2, 055,000. 00 

Miscellaneous accounts uncollected.- 60,507. 78 

Due from Isthmus agency. 23,177. 24 


2, 597,112. 43 

CURRENT LIABILITIES. 

Isthmus drafts. $61, 853. 73 

Sinking fund.-. 158,911. 99 

Coupons not presented. 3, 300. 00 

Accrued interest on bonds. 73, 798. 69 

Due department of Panama. 18, 750. 00 

Six per cent subsidy bonds. 2, 055, 000. 00 

-2, 341,614. 41 

Excess of assets. 255, 498. 02 

Surplus December 31, 1894, as per balance. 1, 885,176. 69 

Corrected surplus December 31, 1893, as per balance. 1,797, 884. 04 

Increase of surplus. 87, 292. 65 


Ernest L. Oppeniieim, Treasurer. 



































































232 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


STATEMENT OF BONDED INDEBTEDNESS AND SINKING FUND. 


December 31, 1894. 

The bonded indebtedness of the company consists of: 

First. 4,000 seven per cent sterling bonds of £200 each, amounting to £800,000 (say 
$4,000,000), of which 2,989 were issued October 10, 1867, and fall due October 10, 
1897. The remaining 1,011 were issued on the 10th of October, 1892, and fall due on 
the 10th of October, 1897, but by resolution of the board of directors the holder is 
given the option of having them extended for ten years, at 5 per cent per annum, to 
the 10th day of October, 1907, the company reserving to itself the right of redemp¬ 
tion at 105 and accrued interest of such extended bonds at any date subsequent to 
the 10th day of October, 1902. Of this latter issue 471 bonds are in the company’s 
treasury. 

To meet this bonded indebtedness the company has the following sinking fund: 


663 Panama seven per cent general mortgage sterling bonds, valuation. 

352 Panama six per cent subsidy bonds, valuation. 

100 six per cent railway mortgage bbnds, cost. 

270 five per cent railway mortgage bonds, cost. 


$663, 000. 00 
352, 000. 00 
101, 080. 00 
239, 829. 59 


1, 355, 909. 59 

Due by Panama Railroad Company. 158,911. 99 


1, 514, 821. 58 

Second. 2,055 six per cent gold sinking fund subsidy bonds of $1,000 each, amount¬ 
ing to $2,055,000, were issued November 1, 1880, and fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March 27, 1908, the same to be applied by the com¬ 
pany, first, to the payment of the interest, and second, as a cumulative sinking fund, 
for the redemption of the principal; the bonds to be drawn yearly in September to 
an amount equal to the then surplus of the subsidy sinking fund, the drawn bonds 
to be paid in November 1 after each drawing, and thereby redeeming the*whole 
issue in 1908. 

Ernest L. Oppeniieim, Treasurer. 


[Extracts from Report of the Panama Railroad Company for 1895.] 

New York, March 25, 1896. 

To the President and Board of Directors 

of the Panama Railroad Company, 

New York. 

Gentlemen: The following report of the operations for the year ending December 
31, 1895, and statements showing the financial condition of the company at the close 
of the year, are respectfully submitted. 

The gross earnings and the total expenses of the railroad have been as follows: 
Statement of earnings and expenditures. 



1895. 

1894. 

Increase. Decrease. 

EARNINGS. 

Colon to Panama : 

From freight. 

$711,745.31 
8,283.06 
31,790.68 
38,696.01 

$574,807.91 
6,516. 62 

29.648.53 

31.431.54 

$136,937.40 
1,766.44 
2,142.15 
7,264.47 


From treasure. 

From mails. 

From passengers. 

Panama to Colon: 

From freight. 


790,515.06 

642,404.60 

148,110.46 !. 

471,174.97 
10,622.40 
5,581.46 
33,741.77 

370,582.42 
10,801. 56 
4,835.30 
27,909. 89 

100,592.55 


From treasure. 

$179.16 

From mails. 

746.16 
5,831.88 

From passengers. 


521,120.60 

414,129.17 

106,991.43 . 








































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


233 


Statement of earnings and expenditures —Continued. 


1895. 


earnings— continued. 


Miscellaneous receipts: 

Interest and exchange... 

Lighterage. 

Water supplied shipping. 

Rental of property. 

Ballast. 

Wharfage and light dues 

Telegraph. 

Other items. 


Total earnings. 

EXPENDITURES. 


$21,086.53 
279,518. 30 
51,236.67 
22, 742.06 
92.91 
16,441.75 
3,077.40 
659. 36 


394,804.98 


1,706,440.64 


General expenses. 

European and South American agency 

expenses. 

Lost and damaged freight. 

Drawback on Colombian produce. 

Republic of Colombia, for nonextension 

of road. 

Operating expenses on the Isthmus: 

Superintendence. 

Conducting transportation. 

Supply department. .. 

Lighterage. 

Wharves. 

Real estate. 

Repairs. Colon buildings... . 

Colon station. 

Panama station. 

Maintenance of way... 

Telegraph.. 

Taboga waterworks. 

Freight on stores. 


Advances to steamers: 

Colombian Line. 

Panama Line. 

Steamer Saturn, voyage San Fran¬ 
cisco to New York. 


97, 978. 69 

7,129.55 
4,891.33 
16,750.19 

10,000.00 

52,422.21 
157,688.94 
6,655. 68 I 
114,655. 72 
54,543. 36 
10,231.92 
45,409. 01 
57,485. 09 
91,397.15 
53,888. 02 
1,713.65 
33, 424. 77 
3,554. 00 


819,819. 28 


62,790. 75 
239, 697. 95 

31,269.71 

333, 758.41 


Total operating expenses. 1,153,577.69 

Earnings over operating expenses. 552,862.95 


Deduct fixed charges: 

Subsidy to Republic of Colombia. 25,000.00 

Redemption of subsidy bonds. 102,000.00 

Interest on subsidy bonds. 123,300.00 

Interest on sterling bonds. 239,619.10 


489,919.10 


Earnings over fixed charges. 62,943.85 

Fixed charges over earnings. 


1894. 


Increase. 


$12,952.59 
213,590.41 
42,365.38 
19,190. 77 


14, 624.00 
3,321.67 
777.03 


306,821.85 


1,363, 355.62 


86,626.34 

7.105.94 

2.657.94 
16,716.52 

10,000. 00 

57,389. 74 
148,966.21 
15,567.26 
90,841. 47 
33, 377. 32 
9,808. 70 
30,210.21 
52,639. 73 
80, 377. 66 
64,846.76 
2,048.17 
29,450.25 
3,532.70 


$8,083. 94 
65,927. 89 

8.871.29 

3.551.29 
92.91 

1,817. 75 


87,983.13 


343,085.02 


11,352. 35 

23. 61 
2,233.39 
33.67 


Decrease. 


8, 722. 73 


23,814.25 
21,166.04 
423. 22 
15,198.80 
4,845.36 
11,019.49 


3,974. 52 
21.30 


742,162. 92 


'7,656.36 


43,565.52 
167,664.10 


211,229. 62 


953,392. 54 
409,963.08 


19,225.23 . 
72,033.85 . 

31,269.71 . 


122,528.79 i. 


200,185.15 . 
142,899.87 |. 


25,000.00 
97,000. 00 
129,120.00 
239, 619.10 


490, 739.10 


5,000.00 


80,776.02 


143,719. 87 


$244.27 
117.67 


4,967.53 
*8, 911.' 58 


10,958.74 
334. 52 


5,820.00 


820.00 


Compared with those of the preceding year, the total gross earnings for 1895 
increased $343,085.02, or 25.16 per cent, and the operating expenses, $200,185.15, or 
21 per cent, making an increase in net earnings of $142,899.87. 

The increase in gross earnings is very gratifying. It was general upon all classes 
of earnings, but bore more especially upon freight traffic and lighterage. The 
increase from freight traffic was $237,529.95, or 25.12 per cent; from lighterage, 
$65,927.89, or 30.87 per cent; in earnings from passenger traffic, $13,096.35 or 22.07 
per cent; in earnings from interest and exchange, $8,083.94, or 62.41 per cent; in 
earnings from water supplied shipping, $8,871.29, or 20.94 per cent; in earnings from 
rental of property, $3,551.29, or 18.50 per cent. 





























































































































234 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


FREIGHT TRAFFIC. 


The following table will show comparatively the freight transported over the 
Panama Railroad during the years 1895 and 1894: 


Years ending December 31— 

| 1895. 

1894. ' Increase. 

Tons carried west bound: 

Local. 

16,993 

81,686 

51,308 

! Per cent. 
15,660 8.51 

62,536 30.62 

42,885 19.64 

From Europe to all destinations. 

From New York to all destinations. 

Total. 

149,987 

121,081 23.87 

Tons carried east bound: 

Local. 

4,331 

69,005 

47,740 

2,795 54.96 

60,824 13.45 

31,976 49.30 

From all destinations to Europe. 

From all destinations to New York. 

Total. 

121,076 

95,595 26.65 

Total east bound and west bound_,. 

271,063 

216,676 25.10 



Compared with the freight business for 1894, the number of tons moved in 1895 
shows an increase of 54,387, or 25.10 per cent, and the freight earnings an increase 
of $237,529.95, or 25.12 per cent. 

Of the total tonnage moved, 55.33 per cent was west-bound traffic, and 44.67 per 
cent east-bound traffic. 

The through traffic amounted to 92.13 per cent of the total number of tons moved. 


Table B.— Treasurer’s statement. 


CURRENT ASSETS. 


December 31, 1895. 


Cash in banks, New York. $77, 782. 87 

Cash in banks, London (£7,935 2s. lOd. at $4.85, company’s rate)_ 38,485.44 

Cash in hands of agents..... 22, 475. 27 

Petty cash.... 118.20 

Deposited with trust companies. 85, 000. 00 

Uncollected earnings (partly estimated). 84,581.31 

Coal and supplies on hand . 141, 597. 97 

Accrued interest on deposits. 108. 06 

Accounts receivable... 127, 608. 58 

Advance of subsidy to Republic of Colombia. 1,953, 000. 00 


current liabilities. 


Isthmus drafts not presented. 

Coupons not presented. 

Subsidy bonds not presented. 

Accrued interest on bonds.. 

Miscellaneous accounts unadjusted 

Due connecting companies.. 

Due department of Panama. 

Due sinking fund. 

Six per cent subsidy bonds. 


Excess of liabilities... 

Corrected surplus December 31, 1894, as per balance 
Surplus December 31, 1895, as per balance. 

Decrease of surplus. 


2, 530, 757. 70 


$30, 

770. 

75 

3, 

945. 

80 

3, 

000. 

00 

72, 

778. 

69 

57, 

872. 

42 

37, 

082. 

66 

21, 

875. 

00 

374, 

737. 

59 

1,953, 

000. 

00 


2, 555, 062.91 


24, 305. 21 


1,884,158. 41 
1,644,145. 47 


. 240,012.94 

S. Deming, Treasurer. 

























































INVESTIGATION OF PANAMA RAILWAY COMPANY. 235 

Table C. Statement of bonded indebtedness and sinking fund. 


, December 31, 1895. 

lne bonded indebtedness of the company consists of: 

/ Fir ?; 4 ’j? 00 ® even P e . r cent sterling bonds of £200 each, amounting to £800,000 
(say $4,000,000), of which $2,989 were issued October 10, 1867, and fall due October 
10, 1897. The remaining 1,011 were issued on the 10th of October, 1892, and fall 
due on the 10th of October, 1897, but by resolution of the board of directors the 
holder is given the option of having them extended for ten years, at 5 per cent per 
annum, to the 10th day of October, 1907, the company reserving to itself the right 
of redemption at 105 and accrued interest of such extended bonds at any date subse¬ 
quent to the 10th day of October, 1902. Of this latter issue 471 bonds are in the 

company’s treasury. 

To meet this bonded indebtedness the company has the following sinking fund: 

693 Panama seven per cent general mortgage sterling bonds, valuation.. $693,000. 00 

326 Panama six per cent subsidy bonds, valuation. 326, 000. 00 

100 six per cent railway mortgage bonds, cost. 101, 080. 00 

120 five per cent railway mortgage bonds, cost. 109,120. 84 


^ 1,229,200.84 

Due by Panama Railroad Company. 374, 737. 59 


1, 603,938.43 

Second. 1,953 six per cent gold sinking fund subsidy bonds of $1,000 each, amount¬ 
ing to $1,953,000, issued November 1, 1880, fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Govern¬ 
ment subsidy was pledged till March 27, 1908, the same to be applied by the com¬ 
pany, first, to the payment of the interest, and second, as a cumulative sinking fund, 
for the redemption of the principal; the bonds to be drawn yearly in September to 
an amount equal to the then surplus of the subsidy sinking fund, the drawn bonds 
to be paid on November 1 after each drawing, and thereby redeeming the whole 
issue in 1908. 

S. Deming, Treasurer. 


[Extracts from the forty-seventh annual report of the Panama Railroad Company.] 

New York, March 25, 1897. 

To the Stockholders of the Panama Railroad Company. 

Gentlemen: I now submit for your consideration the report of the vice-president 
and general manager, with accompanying statements of earnings and expenditures 
for the calendar year 1896, accompanied by the treasurer’s condensed balance sheet. 

Despite the fact that the tendency of all transportation rates for the past twelve 
months has been downward, and that the earnings from traffic of all kinds moved 
over our route show a loss of $110,061.36, the company, owing to very important 
reductions in the cost of operation of the railroad and of the company’s steamship 
line, and to the owning and operation of steamers between New York and Colon, 
has been able to more than counterbalance all unfavorable influences. The result of 
fifteen months’ operation of the contract of December 16, 1895, w T ith the Pacific Mail 
Steamship Company entirely supports the estimate made of its value to the company. 

The effort previously made to establish a so-called Government telegraph line 
across the Isthmus w T as revived during the year, and has been met by a vigorous 
protest to the Colombian Government by the company, and has accordingly been 
suspended. 

A law r department has been created and the entire legal affairs of the company 
placed in the hands of eminent counsel. 

All of the company’s officers and employees who are responsible for the safe 
handling of its funds have been bonded in a responsible surety company in New 
York. 

The thirty year 7 per cent sterling mortgage bonds of the company, originally 
issued to the amount of £1,000,000 ($5,000,000), mature on October 10, 1897. 

Although there w r as no sinking fund obligation which required it so to do, the 
company from motives of prudence voluntarily set aside surplus earnings, from time 
to time, for the purpose of meeting the bonds at maturity, and has thus voluntarily 









236 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


reduced the balance, for which provision is to be made, to the comparatively small 
sum of £537,600, as will be seen from the following statement, viz: 

Original sterling bond issue.-. £1,000, 000 

Bonds of this issue heretofore redeemed or now in the hands 
of the company, acquired from time to time and ready for 
cancellation. 462,400 


537, 600 

For the retirement of which the company holds United States 
Government bonds and other securities set aside from time 
to time for this purpose in its voluntary sinking fund. 187, 800 

Balance December 31, 1896. £349, 800 

To which will also be applicable: 

Interest to accrue on bonds in voluntary sinking fund to October 10, 1897, 
and estimated net earnings to July 1, 1897, amounting to. 50, 400 


Leaving to be provided for at maturity of bonds (after application 
of foregoing). 299,400 

There are but 2,688 of these bonds now in the hands of the public. 

For the purpose of meeting said balance of £299,400, and of making prudent pro¬ 
vision for the present improvements of terminals and service, as well as for the future 
development and requirements of the company, a new issue of twenty year 4J first 
mortgage sinking fund gold bonds will be made by the company for the present 
amount of $2,000,000, but limited in the aggregate to $4,000,000, and reduced in 
interest rate to 4| per cent per annum. By this reduction in the principal, and 
also in the rate of interest, the company has reduced its annual fixed charge over 
$ 100 , 000 . 

From the sale of $2,000,000 of the new 4£ first mortgage sinking fund gold bonds 
about to be issued, and with its voluntary cash fund the company will have sufficient 
to retire the outstanding sterling mortgage bonds at maturity and leave a surplus of 
half a million. 

This new mortgage will constitute the only mortgage indebtedness of the company. 

The company has outstanding $1,846,000 subsidy sinking fund bonds, finally 
maturing November 1, 1910, before which time, however, they will have been retired. 

These last-mentioned bonds are not secured by a mortgage, and do not represent any 
increased indebtedness. They were originally $3,000,000, and were merely issued in 
the year 1880, at the request of the Colombian Government, to capitalize for the 
Government for twenty-seven years (and put in the form of negotiable bonds for the 
utilization of the Government) the annual subsidy of $225,000 provided for by the 
concessions. The company draws and pays annually an amount of these bonds 
which, with the interest on the whole outstanding issue, equals the cash subsidy of 
$225,000, which it would otherwise pay directly to the Government; but this does 
not involve any interest charge or additional payment, indebtedness, or burden upon 
this company. The original issue was $3,000,000, but by annual drawings, as-indi¬ 
cated, the company has paid and cancelled $1,154,000. The interest payment is 
made by the company out of the $225,000 due the Government, and bondsare then 
drawn annually for the difference up to the $225,000, and in this way the issue will 
be annually reduced and retired before maturity, when the payment of the annual 
subsidy direct to the Government will be again renewed. 

The fixed charges of the company are only the fixed annual concessionary charge, 
$250,000, and interest on the present issue of bonds. 

To meet the requirements of the drveloping traffic of the Pacific coast with the 
United States and Europe, and to abolish the system of lighterage service in the bay 
of Panama which has prevailed for nearly fifty years, and to introduce the most 
improved methods of loading, unloading, and handling traffic, the company has 
contracted for the construction of a great pier, harbor, and other like improvements 
and facililies in the bay of Panama, permitting the loading and unloading of cargoes 
directly from vessel to cars. These improvements are now under way and will cost 
about $1,000,000. 

The large savings in expenses of operation of direct shipment over the lighterage 
(involving double handling of cargoes) is self-evident; while the increase in business 
from the shortening of the voyage at least seven days, freedom from delays, inter¬ 
ruptions and accidents, and general facilitation of business, give assurance"that the 
annual cash results from these improvements will be far in excess of the annual 
interest charge represented thereby. 












INVESTIGATION OF PANAMA RAILWAY COMPANY. 


287 


Additions to the company’s fleet of steamers, the establishment of grain elevators 
and warehouses on the Isthmus, and other equally important improvements are also 
contemplated in the early future. These latter additions and improvements will 
involve an expenditure during the next few years of about $700,000. 

Although the company does not design the* issue at present of more than $2,000,000 
of said bonds, provision for the future in the completion of the remunerative im¬ 
provements above suggested, and others contemplated, have made it prudent to 
provide for an ultimate issue in the future to the aggregate amount of $4,000,000, but 
under very strict conditions upon further issues to insure the security and protection 
both of the bondholders and the company. 

The railroad and its equipment, as well as the steamships, tugs, lighters, and other 
property of the company, have been brought to a high state of efficiency. 

W hile thus presenting the record of the year just closed, a few observations of a 
general nature may be useful. 

The concessions* from the United States of Colombia, granted originally in 1850, 
run to A. D. 1966, and have continued for forty-seven years unimpeached and 
unquestioned. They are of great value and represent as well a large cash investment 
fully discharged, and leaving payable only the annual subsidy of $250,000. By the 
terms of its concession all property of the company is entirely exempt from taxation, 
and the value of this will be appreciated. 

The corporation exists under perpetual and special charter granted by the legis¬ 
lature of the State of New York April 7, 1849, and covers powers to operate steam¬ 
ship as well as railroad lines under these concessions and otherwise. 

The net earnings of the company for the past five years have averaged $614,781.69 
per annum. The net earnings for the past year are $1,035,303.63! The years of 
1893, 1894, and 1895 were the years of aggressive competition by this company to 
secure and establish the firm position it attained in 1895. 

During the ten years prior to 1893 the company paid to its stockholders an average 
of 7.2 per cent per annum in dividends, but for the past four years has found it more 
advantageous (under the liberal encouragement of its stockholders) to apply the net 
earnings to the purchase of three large steamers, and otherwise for the improvement 
and protection of its increasing transportation interests. The year that has just 
closed shows 7 per cent net earned on the $7,000,000 of stock after payment of every¬ 
thing due, which will not be distributed to stockholders. 

The results of operation during the past four years have been of especial value and 
interest to security holders. 

On the Atlantic side .—The company has completely established its supremacy. It 
established its own steamship line between New York* and the Isthmus of Panama, and 
this is now the only line between said points. The company owns and has fully paid 
for the three steamers in question, aggregating 8,193 tons burthen, and operating in 
said regular service. 

It has strengthened its connections and traffic arrangements with-steamship lines 
running between Colon and the principal ports of Great Britain, France, Belgium, 
Germany, Spain, and Italy, thus connecting all European points, most of which it 
has held for over thirty years. 

On the Pacific side. —It has secured its liberty after next year from the restrictive 
contract made in 1872, excluding it from Central America. That most profitable 
country thus will again opened to the company after 1898. 

It has established contracts which secure regular and effective service and connec¬ 
tions between Panama and the western coast of the continent north to San Francisco 
and south to Valparaiso, Chile. 

It is gratifying to contemplate that your company has continued without cessation 
or financial default for a single moment for the almost half century of its existence. 

I respectfully refer you to the accompanying reports for further particulars. 

Respectfully submitted. 

J. Edward Simmons, President. 


Panama Railroad Company, 

New York, March 24, 1897. 

To the President of the Panama Railroad Company. 

Sir: I respectfully submit the following report of the business and operation of the 
company for the year ending December 31, 1896, and of the condition of its property 
and finances at the close of the year. 



238 


INVESTIGATION OF PANAMA RAILWAY COMPANY 


The operations of the year show the following results: 


Statement of earnings and expenditures. 


EARNINGS. 


1896. 


1895. 


Increase. I Decrease. 


Railroad: 

Colon to Panama— 

Freight. 

Treasure . 

Mails. 

Extra baggage. 
Passengers. 


Panama to Colon— 

Freight. 

Treasure . 

Mails. 

Extra baggage. 
Passengers. 


Total earnings of railroad_ 

Steamship lines: 

Panama Railroad Steamship Line- 

Freight . 

Treasure . 

Mails. 

Extra baggage. 

Passengers. 

Miscellaneous. 


Temporary Pacific Line— 

Freight. 

Total earnings of steamship lines. 

Joint railroad and steamship receipts— 

Interest and exchange. 

Lighterage. 

Water supplied shipping. 

Rental of property. 

Wharfage, storage, and light dues.. 

Telegraph. 

Miscellaneous. 


Total earnings. 

EXPENDITURES. 

Operating expenses of railroad: 

General expenses on Isthmus. 

Conducting transportation. 

Maintenance of equipment. 

Maintenance of way and structure 


Operating expenses of steamship lines: 
Panama Railroad Steamship Line— 

Steamer expenses. 

Replacement of boilers and special re¬ 
pairs . 

Agency expenses. 

Charter of steamers. 


$704, 992.89 
3,803.11 
36, 638.52 
alO, 540.11 
50, 287.72 


8711, 745. 31 
8,283.06 
31, 790. 68 


38,696. 01 


$4,847.84 
10,540.11 
11,591.71 


$6,752.42 
4, 479.95 


806, 262. 35 


790,515.06 


15,747.29 


322,356. 74 
17,209. 91 
5.057.41 
a 6, 236. 79 
44,451.10 


471,174. 97 
10,622. 40 
5,581.46 


6,587. 51 


33,741.77 


6, 236. 79 
10, 709. 33 


148,818.23 


524.05 


395,311.95 


521,120. 60 


125,808. 65 


1,201,574.30 


1,311,635. 66 


110,061.36 


468,878. 60 
11,261.36 
55,862.66 
2,758.22 
140, 673.14 
b 11, 770.80 


388,545.49 
52,207. 73 


150,215.35 

88,465. 41 
11,770.80 


691,204. 78 


440,753.22 


250,451.56 


31,000.05 


292, 849. 32 


261,849. 27 


722, 204.83 


733, 602. 54 


11, 397.71 


9,853. 87 
210,232.01 
60, 469.69 
21,666. 76 
37,225. 71 
4,436.70 
c 3,477. 64 


21,036.53 
279, 518.30 
51,2l36.67 
22, 742.06 
16, 441. 75 
3,077.40 
752.27 


9,233. 02 


20,783. 96 
1,359.30 
2, 725.37 


11,182.66 
69,286.29 


1,075.30 


347, 362.38 


394,804.98 ]. 


47,442. 60 


2,271,141.51 


2,440,043.18 


168,901.67 


40,497. 65 
228,335.10 
53,965.22 
59,600. 21 


59, 077. 89 
311,838.83 
53,888. 02 


5,712.19 


18,580.24 
29,538.51 


382.398 18 


424,804. 74 


42,406. 56 


351,216.74 

2,199. 96 
102, 253. 42 
13, 500.00 


391, 214.62 


100,329. 35 

12,000. 00 


2,199. 96 
1, 924.07 
1,500.00 


39,997.88 


469,170.12 


503,543. 97 


34,373.85 


a In 1895 extra baggage earnings were included in freight earnings. 
b In 1895 these receipts were included in receipts from freight. 

c This item includes $2,059.69 for switching. In 1895 these receipts were deducted from transporta¬ 
tion expenses. 





































































































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 

Statement of earnings and expenditures —Continued. 


239 


expenditures— continued. 

Operating expenses of steamship lines.—Cont’d 
Temporary Pacific Line— 

Steamer expenses. 

Agency expenses. 

Steamer Saturn, voyage San Francisco 
to New York. 


Total for steamship lines. 

Joint railroad and steamship expenses— 

General expenses.. 

Foreign agency expenses.. 

Losses on cargo.. 

Drawback on Colombian produce.. 

Republic of Colombia for nonextension 

of road.. 

Lighterage.. 

Docks and wharves.. 

Real estate.. 

Repairs Colon buildings.. 

Taboga water works.. 


Total expenditures.. 

Earnings over operating expenses. 


Deduct fixed charges— 

Subsidy to Republic of Colombia 
Redemption of subsidy bonds 

Interest on subsidy bonds. 

Interest on sterling bonds. 


Net income 


1896. 


824,440. 07 
3,055.67 


27,495.74 


496,665.86 


1895. 


Increase. 


$491,259. 67 
41,287.60 

31,269. 71 


563,816.98 


1.067,360.95 


102,578.68 
15, 307.49 
6,553.63 
13,643.78 

10,000. 00 
116,863.18 
45,849.50 
12, 602.53 


33,375.05 


356, 773.84 


1,235,837. 88 


1,035,303. 63 


25,000.00 
107,820.00 
117,180.00 
239,619.10 


97,978.69 
7,129.55 
4,891.33 
16, 750.19 

10,000.00 
114, 655. 72 
54,543. 36 
10,231.92 
45,409. 01 
33,424. 77 


395,014.54 


1,887,180.23 


552,862.95 


25,000. 00 
102,000.00 
123,300.00 
239,619.10 


489,619.10 489,919.10 


545,684.53 62,943.85 


Decrease. 


$466,819.60 
38,231.93 

31,269.71 


536,321.24 


570,695.09 


$4,599. 99 
8,177.94 
1,662.30 


2,207.46 


2,370.61 


3,106.41 


8,693.86 


45,409.01 
49.72 


38,240.70 


651,342.35 


482,440. 68 


5,820.00 


6,120.00 


300.00 


482,740. 68 


Compared with those of the preceding year, the total gross earnings for 1896 show 
a decrease of $168,901.67, or 6.92 per cent, and the operating expenses a decrease of 
$651,342.35, or 34.51 per cent, making an increase in net earnings of $482,440.68, or 
87.26 per cent. 

Taking into consideration the severe business depression which prevailed during 
a large portion of the year, the poor coffee crop in Central America, and the strong 
competition between transportation interests, these results may be considered very 
satisfactory. 


Earnings. 

RAILROAD. 

The decrease in total earnings of the railroad was $110,061.36, or 8.39 percent, 
and results entirely from freight. There are increases on all other classes of earnings. 

The following table will show, comparatively, the freight tonnage over the rail¬ 
road during the years 1896 and 1895: 


Year end- 
| ing De¬ 
cember 
! 31,1896. 

Year-end¬ 
ing De¬ 
cember 
31,1895. 

Increase. 

Decrease. 


Tons. 
180,476 
98,721 

Tons. 
149,987 
121,076 

Per cent. 
20.33 

Per cent. 


18.46 



279,197 

271,063 

3.00 









































































































240 INVESTIGATION OF PANAMA RAILWAY COMPANY. 
The gross earnings per ton moved on the road compare as follows: 



Year end¬ 
ing De¬ 
cember 
31,1896. 

Year end¬ 
ing De¬ 
cember 
31,1895. 

Decrease 
in 1896. 

West bound. 

$3.91 

3.26 

$4.74 

3.89 

Percent. 

17.51 
16.19 

East bound. 

Average. 

3. 68 

4.36 

15.59 



It will be seen by Table No. 1 that the decrease on freight tonnage bears more 
particularly on the business between the two coasts of the United States; this impor¬ 
tant decrease is due to the depression already referred to. 

The decrease from the west coast of America to Europe was more especially caused 
by a largely reduced coffee crop in Central America in 1896. 

As will be seen by the following statement the east-bound traffic has fallen off on 
almost all classes of freight: 


Products of agriculture: 

Cotton*. 

Cocoa . 

Coffee. 

Indigo. 

Ivory nuts. 

Rubber. 

Tobacco . 

Balsam. 

Plants. 

Coca. 

Sarsaparilla. 

Straw. 

Barley. 

Beans . 

Mustard seed. 

Tea. 

Products of animals: 

Hides. 

Hides and skins. 

Wool. 

Leather . 

Glue. 

Products of mines: 

Ore. 

Lead. 

Products of the forest: 

Bark. 

Mahogany, logs. 

Manufactures: 

Sugar . 

Iodine. 

Hats. 

Quicksilver. 

Wine. 

Rags. 

Borax. 

Bone dust. 

Canned goods. 

Asphaltum. 

Antimony. 

Treasure.. 

Miscellaneous. 


1896. 1895. | Increase. Decrease. 




Per cent. 


.bales.. 

.bags.. 

.do_ 

.zeroons.. 

.bags.. 

..bales.. 

.do_I 

.cases.. 

.do_ 

..bales.. 

.do.... 

.do_ 

...bags.. 

.do_ 

.do... 

.chests.. 

.single..) 

.bundles.. I 

.bales.. 

.do_ 

.barrels.. 

.bags.. 

.Pigs-- 

.bales.. 

.tons.. 

.bags.. 

.barrels.. 

.zeroons.. 

.flasks.. . 

barrels and casks.. 

.bales.. 

.boxes.. 

.bags.. . 

.cases.. 

.barrels.. 

..do. 

.packages.. 

.do_ 


460 
139,078 
609,655 
7,123 
32, 499 
10,596 
1, 767 
739 


23 


3, 480 
9 

245 


20,821 
5,944 


115,473 
5,732 
15 
337 
250 

4,058 
2,390 

3.146 
214 

1,004 

3,414 

221 


23, 759 
1,526 
36,356 


73, 370 
1,227 


8,027 
2, 333 


1,805 i 
178,776 ! 
827,976 : 
8,891 : 
I 23,962 j 
11,737 ! 
1,699 
640 ! 
142 | 
1,537 I 


71 

46,664 
40,434 
28,950 
117 

131,489 
7,799 
671 
928 
476 

3,548 
9, 355 

6,211 

666 

5,321 
1,019 
237 

10, 600 
56, 784 
3, 796 
21,893 
14, 905 
234, 773 
2,019 
10 
4,964 
6,795 


35. 63 


4.00 
15. 47 


126. 41 
100.00 
245.07 


14.38 ' 


235.03 


66.06 


6L70 


Per cent. 
74.51 
22.20 
26.37 
19.89 


9.72 


83.80 


100.00 

48.50 

79.47 
100.00 

12.18 

26.50 
97.76 
63.68 

47.47 


74.45 


49. 35 
67.87 

81.13 


6.75 
100.00 
58.15 
59. 80 


100.00 
68.75 
39.22 
100.00 


65. 66 


The increase in tonnage from Europe and New York to the west coast is due to new 
agreements made with the South Pacific and Central American carriers and to reduc¬ 
tions of rates to meet Magellan competition. 

Business on the Isthmus of Panama has been more active than in 1895, which 
accounts for the increase in local freight between Colon and Panama. 

Compared with the freight business of 1895, the total tonnage moved over the road 
in 1896 shows an increase of 8,134 tons, or 3 per cent, and the freight earnings a 
decrease of $138,793.75, or 11.73 per cent. 

Of the total tonnage moved, 64.64 per cent was west-bound traffic and 35.36 per 
cent east bound. In 1895 these proportions were 55 and 45. 
































































































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


241 


Through traffic amounted to 83.57 per cent of the total number of tons moved. 

In 1896 there was an increase of earnings of $2,107.56, or 11.15 per cent on treasure, 
and of $4,323.79, or 11.57 per cent on mails. 

Passenger earnings and passengers carried were as follows: 


Classification. 

Passengers carried. 

Passenger earnings. 

1896. 

1895. 

Increase. 

1896. 

1895. 

Increase. 

First class. 

6,293 
97,464 

5,283 
57,806 

Per cent. 
19.12 
68.60 

$35,360.15 
59,378.67 

$29,949.90 
42, 487.88 

Per cent. 
18.06 
39.75 

Second class. 

Total. 

103,757 

63,089 

64.46 

94,738.82 

72,437.78 

| 30.78 



Average receipt per passenger. 


Classification. 

1896. 

1895. 

Increase. 

Decrease. 

First class: 

Through . 

$8.73 
2.69 

4.18 
.52 

$8.73 
2.55 

4. 49 
.59 

Per cent. 

Per cent. 

Local.. 

5.49 


Second class: 

Through. 

6.90 

11.86 

Local. 





The increase of 40,668, or 64.46 per cent, in number of passengers carried, and of 
$22,301.04, or 30.78 per cent, in earnings is due chiefly to local passengers. 

First-class passengers carried increased 19.12 per cent in numbers and 18.06 per 
cent in earnings. 

Second-class passengers carried increased 68.60 per cent in numbers and 39.75 per 
cent in earnings. 

The average receipts for each first-class passenger was $5.62 in 1896, as compared 
with $5.67 in 1895, a decrease of 0.88 per cent, and for second-class passengers $0.61 
in 1896 as compared with $0.73 in 1895, a decrease of 16.44 per cent. 

The decrease in receipts from second-class passengers is chiefly due to special rates 
made for the transportation of emigrants across the Isthmus. 

STEAMSHIP LINES. 

Under the contract with the Pacific Mail Steamship Company, dated December 16, 
1895, this company ceased the operation of the direct line of steamers it had operated 
between Panama and San Francisco, and the Pacific Mail Steamship Company dis¬ 
continued the operation of its line of steamers between New York and Colon, which 
had run in competition with the Panama Railroad Company’s line on the Atlantic. 

This com pan}’’s Pacific line was discontinued in the beginning of 1896, the last 
steamer arriving in San Francisco Januarv 28; consequently its gross earnings in 1896 
were only $31,000.05, against $292,849.32 in 1895, making an apparent decrease of 
$261,849.27. 

The gross earnings of the Atlantic line in 1896 were in excess of those of 189o by 
$250,451.56, or 56.82 per cent. Table No. 13 gives the detailed statement of monthly 
earnings. 

JOINT RAILROAD AND STEAMSHIP RECEIPTS. 

There is a decrease of $47,442.60, or 12.02 per cent, on this class of receipts, which 
arises entirely from interest and exchange and upon lighterage. 

The decrease in interest and exchange is the result of reduced sales at lower aver¬ 
age rates of the company’s drafts at Colon upon New York. 

There is an increase of $9,233.02 on water supplied to shipping. In 1895 a portion 
of the water sold was carried to the credit of transportation; in 1896 all the receipts 
from this source were included in earnings. Besides this change there has also been 
an increase in the sales of water. . 

The lighterage receipts in Panama Bay were unusually high in 189o, because ot a 
more than average coffee crop. In 1896 the movement of coffee w T as smaller and, in 
addition, eastbound traffic was greatly reduced on account of general business depres¬ 
sion, already referred to. There was also a large decrease in the lighterage ot coal, 

PAN RY —05-16 


































242 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

ip consequence of the withdrawal of this company’s line of steamers between Pan¬ 
ama and San Francisco, and from the fact that the Pacific Mail Steamship Company 
had its coal brought by vessels to Panama instead of, as formerly, from Colon. 
These different causes account for the decrease of $69,286.29 in lighterage receipts. 

The following table will show the number of tons lightered during the years 1896 
and 1895: 


1896. 

1895. 

Increase. 

[Decrease. 

Merchandise. 

i Tons. 

.. 162,661 

Tons. 

197,395 

311 

Per cent. 

Per cent. 
17.60 

Lumber. 

319 

2.57 

Coal 

5 815 

27,021 

78.48 




Total__ 

_ 795 

224,727 


24.89 




Until quite lately wharfage rates charged on the Isthmus to shipping were much 
lower than those of contiguous ports, while on the other hand the outlay for heavy 
repairs and replacements was largely in excess of receipts and involved a very seri¬ 
ous loss. After proper and complete investigation the rates were reasonably 
increased, and receipts for wharfage, storage, and light dues in 1896 were in conse¬ 
quence $20,783.96 in excess of corresponding receipts for 1895. 

Revenue from rental of property shows a falling off of $1,075.30, or 4.73 per cent. 
This is accounted for by the fact that a number of buildings on lots leased by the 
company, which were destroyed by the fire of March, 1896, in Colon, have not been 
rebuilt, and in consequence, rental, although due, has not yet been collected; and, 
further, by a reduction made by the company in rentals on certain streets to enable 
the poorer class of tenants to pay. 

It is hoped that revenue from landed properties will improve during the coming 
year as the effects of the fire gradually wear off. 

Expenditures. 

railroad. 

There is a total decrease of $42,406.56 in operating expenses, or 9.98 per cent, 
while the decrease in earnings was 8.39 per cent. The reduction in expenses bears 
upon all departments except on maintenance of way and structures. 

STEAMSHIP LINES. 

As already stated, the company’s Pacific line was in operation in January, 1896, 
only, as against the whole year in 1895. The important reduction of its expenses in 
1896 over 1895 is thereby accounted for. 

Although the receipts of the Atlantic steamship line were 56.82 per cent in excess 
of the earnings of 1895, the expenses of that line show a decrease of 6.83 per cent. 

JOINT RAILROAD AND STEAMSHIP EXPENSES. 

There is a decrease of $38,240.70, or 9.68 per cent, in these expenses. 

Maintenance of Way and Structures. 

The roadway, buildings, and structures have been maintained in good condition 
during the year; 6,356 lignum-vitse cross-ties were placed in the roadbed, and a 
portion of the line reballasted. 

The passenger depot at Colon has been removed to a more central part of the town 
and opposite the Company’s freight house. The new location is not only more sat¬ 
isfactory to passengers, but will permit the enforcement of substantial economies. 

Improvements and extensive repairs have been made to the wharves and piers. 
At Panama all the wharves are in excellent condition; the roof of the American pier 
alone still requires attention; when this is completed the Panama wharves will need 
only inexpensive repairs to keep them in good condition for some years to come. 

Important repairs were instituted at the close of the year upon Colon piers Nos. 1, 
2, and 4. 

A high-level water tank has been erected in Colon to increase the water supply for 
the mechanical department, to give better protection against fires, and to furnish good 
drinking water to the company’s numerous dwelling houses. The expense of this 
water tank and of the piping requisite to carry the water from Monkey Hill Springs, 
has been charged to construction account. 



















INVESTIGATION OF PANAMA RAILWAY COMPANY. 243 
Railroad and Floating Equipment. 

The whole of the company’s plant, engines, tenders, cars, machinery, tools, steam¬ 
ships, tugs, and lighters have been maintained in good working order and repair. 

Two new steel freight lighters of 340 tons capacity were added to the floating equip¬ 
ment and their cost carried to construction account. 

The following statement shows the number and character of the company’s rolling 
stock: 


Locomo- 
| tives. 

Passenger cars. 

Freight cars. 

Miscellaneous. 

Road engines. 

Switch engines. 

Special. 

First class. 

Second class. 

Baggage. 

Box. 

Coal. 

Flat. 

Local express. 

Wrecking. 

Caboose. 

Specie. 

Water. 

Stock. 

Road department. 

Moveable steam 

crane. 

Steam pile driver. | 

Stock on December 31,1896 26 

11 

5 8 

16 

7 

580 

136 

183 

27 

3 

5 

2 

9 

9 

2 

1 

1 

December 31,1885 27 

11 

5 8 

16 

7 

564 

136 

188 

27 

3 

5 

2 

9 

9 

2 

1 

1 

Increase during the year .... 





16 












Decrease during the year 1 

____ 1 























1 ^ 











The 16 new box cars were built with serviceable material taken from cars put out 
of service in past years. The expense of their reconstruction was charged to revenue. 

The 5 missing flat cars were burned in the fire which destroyed a part of Colon on 
March 23, 1896. These cars will be rebuilt this year and the expense charged to 
revenue. 

Engine No. 14, which was old and too weak, was dismantled, and its boiler used 
on the wharves at Panama. The value of this engine will be deducted from con¬ 
struction account. 

The following statement shows the floating equipment of the company: 


Name. 

Gross 

tonnage. 

Length. 

Breadth. 

Depth. 

Hull. 

Passenger 

accommodation. 

Cabin. 

Steerage. 



Feet. 

Ft. in. 

Ft. in. 




Steamship Allian^a. 

2,985 

300 

42 0 

23 9 

Iron .... 

82 

100 

Steamship Advance. 

2,605 

295 

38 4 

23 4 

— do ... 

64 

100 

Steamship Finance. 

2, 603 

300 

38 4 

23 6 

....do ... 

64 

100 

Tug Ancon. 

105 

98 

18 0 

6 0 

_do ... 



Tug Bolivar. 

234 

127 

23 0 

9 6 

_do ... 



Tug and water boat Balboa... 

79 

100 

14 0 

7 6 

_do ... 



4 freight lighters. 

340 

110 

24 2 

7 2 

Steel.... 



14 freight lighters 

230-300 

110 

24 0 

6 6 

Iron_1. 


6 coal lighters 

215 

100 

24 0 

6 0 

_do_ I . 







1 



Statistical statements will be found here appended concerning the freight and pas¬ 
senger traffic of the railroad and steamships, and also information as to the earnings 
and expenses. 

Assets and Liabilities. 

Statement A herewith shows the financial condition of the company on December 
31, 1896. 

On December 31,1895,. the cost of the road and equipment amounted to $10, 077, 375. 01 


On December 31 last it amounted to. 10,076,576.12 


Decrease. 798. 89 

The changes have been as follows: 

Additions: 

Construction of high-level water tank at Colon and pipes to con¬ 
nect Monkey Hill Springs with reservoir. 3,192. 90 

Construction of two steel lighters. 24,393.35 


27,586. 25 








































































244 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Deduction: 

Cost of tug Alma, dismantled and written off. $28,385.14 

Decrease as above. 798. 89 

On December 31, 1895, the value of the company’s real estate was .. 263, 616. 74 

On December 31, 1896, it amounted to.. 266,116. 74 

Increase. 2, 500.00 

—caused by the purchase of land at Bohio. 

General Remarks. 


In the last annual report it was stated that “the finances of your company are in 
better condition than they have been for some y.ears past, and your management is 
instituting rigid and thorough economies in every branch of the service, which will 
still more improve our position during the present year.” These previsions have 
been largely realized, and this year the company’s financial position is better than it 
has been for many years. 

In 1896, $374,737.59 were appropriated out of net earnings mainly to pay for the 
three steamers AUianga, Finance, and Advance. 

In 1894 operating expenses were 69.93 per cent of gross earnings; in 1895, 61.63 
per cent; in 1896, 53.94 per cent. In calculating percentages for 1895 and 1896, the 
earnings and expenses of the Panama Steamship Line were deducted from the totals; 
as this line was an emergency line, created for a given purpose, its expenses were at 
all times greater than its earnings, and that fact was clearly contemplated in advance, 
but the supremacy and independence gained thereby were the results sought for 
and attained. Had these figures not been deducted, the percentage for 1896 would 
have shown still more favorably. 

During the year we have been free from serious accidents of any kind. 

It is my agreeable duty to state that considering the depression of business in 
1896, full credit should be given all the officers and employees whose continued 
good will and earnest cooperation have so largely contributed to these satisfactory 
results, and I here take great pleasure in cordially acknowledging my appreciation 
of their hearty efforts. 

Respectfully submitted. 

G. Whaley, 

Vice-President and General Manager. 

Table No. 1 .—Number of tons of freight moved on the railroad. 

FROM ALL POINTS TO ALL POINTS. 



1896. 

1895. 

Increase. 

Decrease. 

Colon to Panama: 

From New York to San Francisco. 

Tons. 

22,565 

28, 852 

92,137 

27,783 

0 9,139 

Tons. 

27,000 

24,308 

81, 686 

16,993 

Per cent. 

Per cent. 
16.43 

From New York to Panama, South Pacific, Central 
America, and Mexico... 

18.69 

12.79 

63.49 
100.00 

From Europe to Panama, South America, Central 
America, Mexico, and San Francisco. 


From Colon to Panama (local): 

Commercial freight. 


Company’s freigTit. 


Total. 



180,476 

149,987 

20.33 


Panama to Colon: 

From San Francisco to New York. 


13,098 

30,432 
2, 062 

17,308 

66, 943 

4,331 


56.96 
100.00 

From San Francisco to Europe. 

. 

From South Pacific, Central America, Mexico, and 
Panama to New York.. 

20,603 

56,071 

3,436 
a 5,513 

19.03 

From South Pacific, Central America, Mexico, and 
Panama to Europe. 

16.25 

20.66 

From Panama to Colon (local): 

Commercial freight. 


Company’s freight. 

100.00 

Total. 



98,721 

121,076 


18.46 

Total eastlxnmd and westbound. 


279,197 

271,063 

3.00 



«In 1895 theYompany’s freight was not included in the tonnage. 





























































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


245 


Table No. 1 . — Number of ions of freight moved on the railroad — Continued. 
COUNTRIES OF ORIGIN AND DESTINATION. 


- 

1896. 

1895. 

Increase. 

Decrease. 

Colon to Panama: 

For Panama. 

Tons. 
47,568 
65,551 
39,387 
24,411 
3,559 

Tons. 

24,060 
62,083 
29,383 
30,213 
4,248 

Per cent. 

97.70 
5.59 
34.04 

Per cent. 

For Central America. 


For South Pacific. 


For San Francisco. 

19.21 
16.25 

For Mexico. 


Total. 


180,476 

149,987 

20.33 


Panama to Colon: 

From Panama. 


22, 688 
39, 779 
21,173 
13,103 
1,978 

6,933 
55,445 
24,742 
32,494 
1,462 

£27.25 


From Central America. 

28.25 
14.42 
59.67 

From South Pacific. 


From San Francisco. 


From Mexico. 

35.29 

Total. 


98,721 

121,076 


18.46 

Total east bound and westbound. 


279,197 

271,063 

3.00 



Table A .—Balance sheet, December 31, 1896. 

RESOURCES. 


Cost of road and equipment 


Steamers Allianqa, Finance , and Advance . 

Real estate at Isthmus. 

Sinking fund. 

Bonds in the Treasury— 

General mortgage 7 per cent sterling bonds (unissued). $471,000.00 

General mortgage 7 per cent sterling bonds (purchased). 150,574.29 


Advance of subsidy to Republic of Colombia a. 

Current assets— 

Cash in banks, New York. 132,385.59 

Cash in banks, London. 35,602.19 

Cash on hand, Isthmus Agency... 17,737.49 

Cash in hands of agents. 2,722.36 

Coal and supplies on hand. 92,847.68 

Uncollected earnings. 67,588.39 

Due from connecting companies. 83,119.20 

Due from United States Government. 18,982.87 

Due from companies and individuals. 54,459.89 

Due from voluntary sinking fund .... 61.88 

Accrued interest on deposits. (53.78 

Accrued interest on securities owned.. 1,395.73 

Unadjusted accounts. 40,404.32 


$10,076,576.12 
336,655.50 
266,116. 74 
1,631,988.12 


621,574.29 
16,000.00 
1,846,000.00 


548,061.37 


15,342,972.14 


LIABILITIES. 


Capital stock. 

General mortgage 7 per cent sterling bondsb. 

Subsidy 6 per cent bonds a . ... ...... 

Voluntary sinking fund for redemption of 7 percent sterling bonds 

Subsidy bonds drawn, not presented for payment.. 

Accrued interest on bonds: 

Fund for redemption of subsidy bonds. 

Interest on subsidy bonds. 

Interest on general mortgage bonds. 

Department of Panama... 

Republic of Colombia. 


$66,495. 00 
18,460.00 
53,248.68 
21,875.00 
1, 666.67 


7,000,000.00 
4,000,000.00 
1,846,000.00 
1,631,988.12 
16,000.00 


161,745.35 


ol,846 6 per cent gold sinking fund subsidy bonds of $1,000 each, amounting to $4,846,000, issued 

November 1. 1880, fall due November 1, 1910. , , . ., 

To meet this bonded indebtedness $225,000 annually of the Colombian Government subsidy was 
pledged till March 27, 1908, the same to be applied by the company: I irst to the payment of the 
interest, and. second, as a cumulative sinking fund for the redemption of the principal, the bonds to 
be drawn yearly in September to an amount equal to the then surplus of the subsidy sinking fund, 
the drawn bonds to be paid on November 1, after each drawing, and thereby redeeming the whole 

^bOrigirmf issue 5.000, of which 1,000 were subsequently taken up and canceled. Leaving 4,000 7 
per cent sterling bondsof £200 each, amounting to £800,000 (say $4,000,000), of which ‘-,989 were issued 






















































































246 


INVESTIGATION OF PANAMA RAIL WAY COMPANY. 


Current liabilities: 

Isthmus drafts not presented. 

Coupons not presented. 

Due connecting companies. 

Audited vouchers. 

Unclaimed dividends. 

Due deceased or missing employees 
Miscellaneous accounts unadjusted 

Balance to credit of profit and loss. 


119,048. 70 
1,659. 60 
34,467.14 
23,944.79 
307.00 
1,271.66 
19,073. 99 


$99,772.88 
587,465.79 


15,342, 972.14 
S. Deming, Treasurer. 


[Extracts from the forty-eighth annual report of the Panama Railroad Company.] 

New York, March 24, 1898. 

To the Stockholders of the Panama Railroad Company: 

Gentlemen: I respectfully submit for your consideration the report of the vice- 
president and general manager, with accompanying statements of earnings and expend¬ 
itures, for the calendar year 1897, and thetreasurer’s balance sheet and transcript of 
profit and loss account. 

In addition to the complete recital of the company’s business in 1897, furnished by 
attached reports, I need only refer: 

First. To the satisfactory manner in which the company’s 7 per cent £1,000,000 
($5,000,000) loan, due October 10, 1897, was redeemed at maturity; and 

Second. To the progress made during the year in the construction of the projected 
port and pier at La Boca under a contract which was executed with the Panama 
Canal Company, dated February 12, 1897. 

Under authority of the resolutions adopted at your annual meeting of April 5, 1897, 
the company has since created a new first mortgage of $4,000,000, and has issued its 
twenty-year 4^ per cent first mortgage sinking fund gold bonds, limited in the aggre¬ 
gate to $4,000,000, and of which amount $2,000,000 were disposed of in New York 
upon advantageous terms; with the proceeds, together with the amount realized from 
the disposition of assets which had been accumulated for the purpose in the com¬ 
pany’s funds, the £1,000,000 7 per cent sterling loan, which matured October 10, 
1897, was liquidated. 

As the result of these transactions the company’s outstanding mortgage liability is 
reduced to $2,000,000. 

In accordance with the contract with the Panama Canal Company, the construc¬ 
tion of a new port and pier at La Boca has been rapidly progressed until the estimated 
cost of construction, covered by the original contract, viz, 5,000,000 francs, or about 
$962,000, had been entirely expended. 


October 10, 1867, and fall due October 10, 1897. The remaining 1,011 were issued on the 10th of Octo¬ 
ber, 1892, and fall due on the 10th of October, 1897; but, by resolution of the board of directors, the 
holders of these 1,011 bonds were given the option of extension for ten years at 5 per cent per annum, 
to the 10th day of October, 1907, the company reserving to itself the right of redemption at 105 and 
accrued interest of such extended bonds at any date subsequent to the 10th day of October, 1902. All 
of this latter issue, however, is in the company’s treasury and voluntary sinking fund. 

To meet this bonded indebtedness of £800,000 the company has the following: 


Voluntary sinking fund— 

693 Panama 7 per cent general mortgage sterling bonds. $693,000.00 

312 Panama 6 per cent subsidy bonds. 312,000.00 

177 United States 4 per cent registered bonds 1925, market value, 

December 31. 212,400.00 

257 United States 4 per cent registered bonds 1907, market value, 

December 31. 282,700.00 

50 Oregon improvement first mortgage bonds, market value, Decem¬ 
ber 31 . 45,000.00 

120 Northern Pacific 5 per cent consolidated mortgage bonds, market 

value, December 31. 65,700.00 

50 Northern Pacific and Montana first mortgage bonds, market value, 

December 31. 21,250.00 


Due Treasury... 

In Treasury— 

471 Panama 7 per cent general mortgage bonds (unissued) . 
148 Panama 7 per cent general mortgage bonds (purchased) 


1,632,0-50.00 

61.88 

- 1,631,988.12 

471,000.00 
150,574.29 

- 621,574.29 


Total 


2,253,562.41 






























INVESTIGATION OF PANAMA RAILWAY COMPANY. 247 

^°, r , the P[ er * j S . e l*> its approaches, has been practically completed, 

and the dredging of the adjoining basin is about half finished. 

It is now estimated that the additional necessary expense, incident to the comple¬ 
tion of dredging and to the facilities required to adapt the pier to the company’s 
wants, will amount to about $427,000. F y 

The board of directors has decided to push the work to completion, and it is antici¬ 
pated that this will be accomplished before July of this year. 

The projected establishment of grain elevators and warehouses on the Isthmus has 
been temporarily postponed on account of the low rates prevailing in grain traffic 
via Cape Horn. » & 

From the accompanying report it appears that the net earnings for the year repre¬ 
sent. nearly 6 per cent on the $7,000,000 of stock after payment of evervthing due, 
but it has been deemed prudent by your directors, on account of approaching liabil¬ 
ities in connection with the La Boca terminal, that this sum should not be distributed 
in dividends to stockholders. 

The existing contract with the Pacific Mail Steamship Company (unless that com¬ 
pany avails of its option to extend it for a further period of two years) will expire 
by limitation on December 16, next, and the company will be prepared to deal with 
this subject if that contract be not so extended. 

It is gratifying to contemplate that your company has continued during the vear 
its heretofore successful course. 

I refer you to the accompanying reports for further particulars. 

Respectfully submitted. 

J. Edward Simmons, President. 


Panama Railroad Company, 

New York , March i, 1898. 

To the President of the Panama Railroad Company: 

Sir: I respectfully submit the following report of the business and operations of 
the Panama Railroad Company for the year ending December 31, 1897, and of the 
condition of the company’s property and finances at the close of the year. 

The operations of the year show the following results: 7 

Statement of earnings and expenditures. 


1897 . 


1896 . 


earnings. 


Railroad: 

Colon to Panama— 

Freight__ 

Treasure . 

Mails. 

Extra baggage. 
Passengers. 


Panama to Colon- 

Freight . 

Treasure . 

Mails. 

Extra baggage. 
Passengers. 


Total earnings of railroad. 

Steamship lines: 

Panama Railroad Steamship Line- 

Freight . 

Treasure.. 

Mails. 

Extra baggage. 

Passengers. 

Miscellaneous. 


$ 637 , 768.25 
5 , 618.25 
40 , 808.40 
8 , 216 . 96 
43 , 950.42 


736 , 362.28 


435 , 633.89 
16 , 612.18 
5 , 014.30 
6 , 028.95 
42 , 291.04 


505 , 580.36 


1 , 241 , 942.64 


484 , 160.31 
9 , 274 . 24 
56 , 405 . 69 
2 , 049.19 
111 , 781.06 
6 , 816.50 


670 , 486.99 


$ 704 , 992.89 
3 , 803.11 
36 , 638.52 
10 , 540.11 
50 , 287 . 72 


806 , 262.35 


322 , 356.74 
17 , 209.91 
5 , 057.41 
6 , 236.79 
44 , 451.10 


395 , 311.95 


1 , 201 , 574.30 


468 , 878.60 
11 , 261.36 
55 , 862.66 
2 , 758.22 
140 , 673.14 
11 , 770.80 


691 , 204 . 78 


Temporary Pacific Line— 
From freight. 


31 , 000.05 


Total earnings of steamship lines 


670 , 486 . 99 


722 , 204.83 


Increase. 


$ 1 , 815.14 
4 , 169.88 


113 , 277.15 


110 , 268.41 


40 , 368.34 


15 , 281 . 71 


543.03 


Decrease. 


$ 67 , 224.64 


2 , 323.15 

6 , 337.30 


69 , 900.07 


597.73 
43.11 
207.84 
2 , 160.06 


1 , 987.12 


709.03 
28 , 892.08 
4 , 954.30 


20 , 717 . 79 


31 , 000.05 


51 , 717.84 





































































248 


INVESTIGATION OF PANAMA RAILWAY COMPANY 


Statement of earnings and expenditures —Continued. 


earnings— continued. 

Steamship lines—Continued. 

Joint railroad and steamship receipts— 

Interest and exchange. 

Lighterage. 

Water supplied shipping. 

Rental of property. 

Wharfage, storage, and light dues... 

Telegraph. 

Miscellaneous. 


Total earnings. 

EXPENDITURES. 

Operating expenses of railroad: 

General expenses on Isthmus. 

Conducting transportation. 

Maintenance of equipment. 

Maintenance of way and structures 


Operating expenses of steamship line: 

Panama Railroad steamship line— 

Steamer expenses. 

Replacement of boilers and special re¬ 
pairs . 

Depreciation of steamers. 

Agency expenses. 

Charter of steamers. 


Temporary Pacific line— 

Steamer expenses_ 

Agency expenses.... 


Total for steamship lines. 

Joint railroad and steamship expenses— 

General expenses. 

Foreign agency expenses. 

Losses on cargo. 

Drawback on Colombian produce. 

Repjublieof Colombia, for nonextension 

of road. 

Lighterage. 

Replacement of boilors and special re¬ 
pairs to tugs. 

Depreciation of tugs. 

Docks and wharves. 

Real estate and repairs to Colon build¬ 
ings. 

Taboga waterworks. 


Total expenditures. 

Earnings over operating expenses. 

Deduct fixed charges— 

Subsidy to Republic of Colombia. 

Redemption of subsidy bonds. 

Interest on subsidy bonds. 

Interest on sterling bonds to Oct. 10, 

1897. 

Interest on first mortgage bonds. Octo¬ 
ber 1, to December 31, 1897. 

Redemption of first mortgage bonds_ 


1897. 

1896. 

Increase. 

Decrease. 

$44,253.48 
217,604.18 
56,886.14 
17, 094. 04 
47.225.56 
3,153.25 
2,048.97 

$9,853. 87 
210,232.01 
60,469. 69 
21,666. 76 
37,225. 71' 
4,436. 70 
3,477. 64 

i 

$34,409. 61 
7,372.17 



$3,583. 55 
4, 572. 72 


9,999. 85 

1,283. 45 
1,428. 67 



388,275. 62 

347,362. 38 

40,913.24 



2, 300, 705. 25 

2,271,141.51 

29,563. 74 



39. 784.46 
246,686.30 
67,406. 99 
121,531.19 

40, 497. 65 
228,335.10 
53,965.22 
59, 600.21 


713.19 

18,351.20 
13,441.77 
61, 930. 98 




475,408.94 

382,398.18 

93, U10. 76 



370,097.33 

57,000. 00 
41,100.00 
101,622.62 
13, 316.67 

351,216. 74 

2,199. 96 

18,880.59 

54,800. 04 
41,100.00 




102,253.42 
13,500.00 

630.80 
183.33 



583,136. 62 

469,170.12 

113,966. 50 




24,440.07 
3,055.67 


24,440. 07 
3,055. 67 






27,495. 74 


27,495. 74 



583,136.62 

496,665.86 

86,470.76 



94,491.64 
8,405.56 
23,806. 77 
19,102.12 

10,000.00 
105,804.28 

3.000.00 
2,100.00 
34,981. 75 

15,123.03 
30,872.37 

102,578.68 
15,307. 49 
6,553. 63 
13,643. 78 

10,000.00 
116,863.18 


8,087.04 
6.901.93 


17,253.14 
5,458.34 




11,058. 90 

3,000.00 
2,100. 00 



45,849. 50 

12, 602. 53 
33,375.05 

10,867. 75 

2,520.50 

2,502.68 


347, 687.52 

356, 773. 84 


9,086.32 


1,406,233.08 

1,235,837.88 

170,395.20 



894,472.17 

1,035,303. 63 


140,831. 46 


25,000. 00 
113, 240.00 
111,760.00 

186, 370. 42 

22.500. 00 
25, 728.38 

25,000. 00 
107, 820.00 
117,180.00 

239.619.10 



5,420.00 


5, 420.00 

53,248. 68 


22,500.00 
25, 728. 38 





484,598.80 

489,619.10 


5,020. 30 


409,873.37 

545,684.53 


135,811.16 



Net income 















































































































































INVESTIGATION OF PANAMA KAILWAY COMPANY. 249 


Gross revenue receipts, expenditures, and net earnings for 1897 compare, as under, 
with those for 1896: 



Receipts. 

Expenses. 

Net earnings. 

1897. 

$2,300,705.25 

2,271,141.51 

$1,406,233.08 

1,235,837.88 

$894,472.17 
1,035,303.63 

1896. 

Increase (+) or decrease ( —) in 1897. 

+29,563.74 

+170,395.20 

-140,831.46 


Earnings. 

railroad. 

The total increase in earnings in 1897 over 1896 amounts to $10,368.34, or 3.36 per 
cent, and results entirely from east-bound freight and west-bound treasure and mails. 

There are large decreases on all other classes of earnings, due to the prejudicial 
effect upon traffic of a serious epidemic of yellow fever which extended throughout 
several of the Republics of Central and South America during the greater portion of 
the year; to revolutionary uprisings in Central America, with consequent general 
breakdown of credit and business depression; and to the depreciation of silver, affect¬ 
ing the currency of those Republics. 

From the statement of earnings it will be seen that there has been a decrease of 
8.67 per cent in earnings on west-bound business, an increase of 27.89 per cent on 
east-bound, and an increase of 3.36 per cent on the total earnings of the railroad. 

The following table shows the freight tonnage carried over the railroad in 1897 
as compared with 1896: 


[Per ton of 2,000 pounds, or 40 cubic feet.] 


1 

Year 
ending 
Dec.'31, 
1897. 

Year 
ending 
Dec. 31, 
1896. 

Increase. 

Decrease, 

Tons west bound. 

Tons. 
173,345 
117,306 

Tons. 
180,476 
98,721 

Per cent. 

Per cent. 
3.95 

Tons east bound. 

18.82 

Total. 


290,651 

279,197 

4.10 





The gross earnings per ton moved on the road compare as follows: 


' 

Year 
ending 
Dec. 31, 
1897. 

Year 
ending 
Dec. 31, 
1896. 

Increase. 

Decrease. 

West bound.,. 

$3.68 
3.71 

$3.91 

3.26 

Per cent. 

Per cent. 
5.88 

East bound.. 

13.80 

Average . 


3.69 

3.68 

.27 





The decrease in west-bound tonnage occurred entirely on traffic from Europe and 
New York to Central America during the last seven months of the year, and was 
caused by the general depression before referred to. 

A reduction in west-bound rates was made necessary to meet active competition by 
the Magellan route, more especially on freight shipped from New York. 

Table No. 1, attached to this report, shows origin and destination of the freight 
carried over the railroad, and Table No. 6 gives the classification of freight from the 
Pacific coast destined to all points. 

Compared with 1896, the total tonnage carried over the road in 1897 shows an 
increase of 11,454 tons, or 4.10 per cent, and the earnings an increase of $46,052.51, 
or 4.48 per cent. 

Of the total tonnage carried, 59.64 per cent was west-bound and 40.36 per cent east- 
bound. In 1896 these proportions were 64.64 and 35.36 per cent, respectively. 




















































250 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Through freight amounted to 82.93 per cent of the total number of tons carried, 
against 83.57 per cent in 1896. 

In 1897 there was an increase of earnings of $1,217.41, or 5.79 per cent, on treasure; 
of $4,126.77, or 9.90 per cent, on mails; and a decrease of $2,530.99, or 15.09 per cent, 
on excess baggage. This decrease was due to the large falling off in the passenger 
business. 

The following statements show the number of passengers carried and the passenger 
earnings: 


Classification. 

Passengers carried. 

Passenger earnings. 

1897. 

1896. 

Increase. 

Decrease. 

1897. 

1896. 

Decrease. 

First class. 

6, 111 
104,813 

6,293 
97,464 

Per cent. 

Per cent. 
18.78 

$27,030.60 
59,210.86 

$35,360.15 
59,378.67 

Per cent. 
23.55 
.28 

Second class. 

7.54 

Total. 


109,924 

103, 757 

5.94 


86,241.46 

94,738.82 

8.97 




Average receipt per passenger. 


Classification. 

1897. 

1896. 

Increase. 

First class: 

Through. 

$8.91 
2.87 

4.47 
.52 

$8.73 

2.69 

4.18 
.52 

Per cent. 
2.06 
6.69 

6.94 

Local. 

Second class: 

Through. 

Local. 




The number of first-class passengers carried shows a decrease of 1,182, or 18.78 per 
cent, and $8,339.85, or 23.55 per cent, in revenue. These figures indicate the effects 
upon the through passenger traffic of the epidemic already referred to. There was 
an increase of 7,349, or 7.54 per cent, in the number of second-class passengers 
carried. This increase is entirely on local traffic. 

STEAMSHIP LINE. 

The gross earnings of the Atlantic Steamship Line show a decrease of $20,717.79, 
or 3 per cent, due to the causes already referred to. The most important loss is 
in the passenger business, the receipts of which fell from $140,673.14 in 1896 to 
$111,781.06 in 1897. There was in 1897 an increase of $15,281.71 in freight earnings. 
Table No. 9 will give full explanations regarding the divers earnings of the line. 

Thirty-six round trips were made during the year. 

Under the contract with the Pacific Mail Steamship Company, the Pacific Line of 
the Panama Railroad Company was discontinued in 1896, which explains the absence 
of earnings and expenses for that line in 1897. 

JOINT RAILROAD AND STEAMSHIP RECEIPTS. 

There is an increase of $40,913.24, or 11.78 per cent, on this class of receipts, which 
arises entirely from interest and exchange, lighterage, wharfage, storage, and light 
dues. There is a decrease of $4,572.72 on rental of property, due to the depression 
of business on the Isthmus during the greater part of last year. Table No. 14 gives 
the details of interest and exchange account. 

The following table will show the number of tons lightered during the years 1897 
and 1896: J 



1897. 

18%. 

Increase. 

Decrease. 

Merchandise.. 

Tons. 
173,212 
66 
2,731 

Tons. 
162,661 
319 
5,815 

Per cent. 
6.49 

Per cent . 

Lumber. 

79.31 

53.04 



Total. 


176,009 

168,795 

4.27 




























































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


251 


Expenditures. 


The revenue expenditures of 1897 and 1896 compare as under: 



1897. 1896. Increase. 

Decrease. 

Railroad. 

$475,408.94 $382,398.18 

583,136.62 1 496,665.86 

347,687.52 356,773.84 

$93,010.76 
86,470.76 


Steamship lines. 


Joint railroad and steamship expenses. 

Total. 

$9,086.32 

1,406,233.08 1,235,837.88 

170,395.20 





This table shows there is an increase of $170,395.20 in total revenue expenditures 
against an increase of only $29,563.74 in earnings. 

In order to correctly judge these results, which are in some respects apparently 
unfavorable, it is necessary to take into consideration, not only the disturbing ele¬ 
ments already alluded to, but also that during last summer unusually heavy rains 
and freshets caused great damage to the roadbed; that very important improvements 
have been made to the railroad and buildings; that the steamships, upon which lit¬ 
tle had been spent since they became the company’s property, have been thoroughly 
overhauled in Messrs. Cramp & Co.’s shipyards; and that during 1897 reserve fund 
accounts were opened for depreciation of steamers and tugs as well as for replacement 
of boilers and special repairs to steamers and tugs. 

Railroad. 


CONDUCTING TRANSPORTATION. 


This account shows the following increases: 

On fuel for locomotives, on account of increased mileage.... $9,960. 03 

On salaries and wages, due in part to increased traffic, and in part to ab¬ 
normal expenditures caused by the yellow fever epidemic. 9,638. 23 


19, 598. 26 

On other items there are slight decreases of expenditures, amounting to. 1,247.06 


Leaving a net increase in conducting transportation of. 18, 351. 20 


MAINTENANCE OF EQUIPMENT. 

The increase of expenses in this department, which amounts to $13,441.77, is due 
in part to betterments, consisting of applying steel-tired wheels and new axles to 
locomotive trucks, to rebuilding of cars, etc., and also to extra labor expenses while 
many employees and workmen were on sick list during the yellow fever epidemic. 

Nine locomotives and 197 passenger and freight cars were thoroughly repaired dur¬ 
ing the year, and 5 freight cars were completely rebuilt. 

MAINTENANCE OF WAY AND STRUCTURES. 


There is a very important increase of $61,930.98 in this department. During the 
past year very heavy rains, followed by floods of corresponding severity, destroyed 
banks and caused slides in many places, which greatly increased the cost of opera¬ 
tion, and entailed the expense of repairing the special damage to the track, struc¬ 
tures and the heavy wear and tear of equipment, which are incident to such an 
experience It was necessary to rebuild the embankments at Paraiso, Matachin, 
Bas Obispo, and Cucaracha.' The abutments and foundations of 4 bridges were 
badly damaged; the masonry of 2 was rebuilt, and temporary repairs were made to 
two others, the high water of the river preventing anything further being done until 

th The^complete reballasting of the road and the renewal of cross-ties had for divers, 
reasons, been postponed for several years back. It was thought advisable to under¬ 
take this work in 1897. During the year the condition of the track and structures 
has been materially improved. Every bridge, from Colon to Panama has been over¬ 
hauled, including the repairing of piers and abutments, renewal of floors and paint¬ 
ing Grades have been revised, undulations and sags corrected, banks widened and 
their drainage improved bv establishing permanent waterways through them. In 























252 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


1897 12 miles of track have been thoroughly ballasted; 16,987 cross-ties and 166,082 
feet of switch timber have been placed in the track. In connection with these ties 
and switch timber there have been placed in the track 22,000 Servis tie plates, which 
have materially bettered the gauge and prevented the cutting of rails into the ties. 
Low joints and the breaking of weak fish plates were a constant trouble. To over¬ 
come these difficulties, 9J miles of track, where sharp curves or lighter rails exist, 
have been relaid with new angle plates. During the year the new passenger station 
at Colon was finished; a complete rock-crushing plant was also installed at Pedro 
Miguel, which will overcome the necessity hitherto experienced of taking the ballast 
required for the whole year from the river during the dry season. The expenses 
incurred for this work have been carried to revenue account. 

The increase in the expenses for maintenance of way and structures divides as 
follows: 


Extraordinary and special repairs.$11,487.31 

Betterments. 50, 443. 67 

Total. % 61,930.98 

Steamship Line. 

The increases of expenditure in this department are as follows: 

Operating expenses. $18, 880.59 

Replacement of boilers and special repairs to steamers. 54, 800. 04 

Depreciation of steamers.«. 41,100. 00 


The operating expenses increased mainly from general repairs on the steamships 
Allianqa , Advance, and Finance; labor on account of the handling of increased ton¬ 
nage; and expenses, during the prevalence of yellow fever, incidental to the require¬ 
ments of the quarantine regulations of the port of New York. 

Extensive improvements were made during the year on all the steamships. In the 
three ships increase of passenger accommodation was provided, and complete electric- 
light plants and electric-call systems were installed. The Allanqa was also provided 
with new boilers, masts, and pumps, while on the Finance and Advance parts of the 
main shafting were renewed; besides which the entire engines, boilers, hulls of the 
three ships were comlpetely overhauled and placed in first-class working condition. 

It is customary in all well-managed steamship corporations to provide and set aside, 
out of earnings, special funds to cover the depreciation of ships and the cost of 
replacement of boilers and extraordinary repairs. The company’s financial condi¬ 
tion warranting the taking of this prudent and conservative measure, without plac¬ 
ing any undue charge upon net earnings, the board of directors decided that on and 
after January 1, 1897, a “fund for depreciation of steamers and tugs” and a “fund 
for replacement of boilers and special repairs to steamers and tugs” be opened on 
the company’s books. It was further decided that an annual appropriation of 
$43,200 should be made to the first, and $60,000 to the second, of these funds. 

The increase of expense in 1897 due to the establishment of the reserve funds is 
thus explained. 

Joint Railroad and Steamship Expenses. 

Although there is a decrease of $9,086.32 in the total of this class of expenses, one 
item “ Losses on cargo,” shows an increase of $17,253.14. This increase is chiefly 
due to the fact that, by reason of a reorganization in our auditing department, freight 
claims were much more quickly settled in 1897 than they previously had been, con¬ 
sequently, by far the larger portion of claims settled in 1897 were upon cargo carried 
during previous years. 

This matter of loss and damage is, however, a serious one, to which careful atten¬ 
tion is being constantly given. The employment of policemen as night watchmen in 
Panama freight yards has resulted in a decided improvement by reducing the num¬ 
ber of robberies, and the extension of that system is contemplated. 

The explanations given regarding the causes of increase of certain items of the 
company’s expenses show that by far the greater portion of this increased expendi¬ 
ture represents permanent improvements, not ordinary operating expenses, and that 
at the end of 1897 the condition of the company’s property was greatly improved. 

Capital Account. 

The $4,000,000 outstanding 7 per cent sterling mortgage bonds of the company, the 
original of which issue amounted to £1,000,000 ($5,000,000), matured on October 10, 
1897, and were redeemed in due course. 









INVESTIGATION OF PANAMA RAILWAY COMPANY. 253 

Two million dollars of the new 4* per cent first-mortgage sinking-fund gold bonds 
were issued on the 15th day of September last. 

The following table shows the changes in capital account for the year: 


Capital stock. 

General 
mortgage 7 
per cent ster¬ 
ling bonds. 

41 per cent 
first-mort¬ 
gage gold 
bonds. 

Outstanding December 31,1896. 

$7,000,000 

$4,000,000 


41 per cent first-mortgage gold bonds issued October 1,1897. 

$2,000,000 




Total.. 

Retired during the vear. 

7,000,000 

4,000,000 
4,000,000 

2,000,000 




Outstanding December 31,1897. 

7,000,000 


2,000,000 

+2,000,000 

Increase ( + ) or decrease (—). 

-4,000,000 


The detail^ of receipts and expenditures on capital account are shown in the fol¬ 
lowing table: 


Credit. 

Debit. 

Depreciation of steamers and tugs_$43,200.00 

Value of locomotive No. 14, disman¬ 
tled . 5,691.05 

Balance, charges in excess of credits.. 21,032.81 

1 

Installation of electric plant, new state¬ 
rooms, and other additions on steam¬ 
ers . 

New terminal at La Boca. 

Waterworks. 

$33,513.77 
36,138.18 
271.91 

69,923.86 


69,923.86 


One hundred and fourteen of the outstanding 1846 6 per cent sinking-fund subsidy 
bonds were drawn and redeemed in September. 

During the past year great progress has been made in the construction of the pier 
and in the excavation of the deep-water port at La Boca. At the close of the year 
the pier was practically completed and the dredging of the basin was about one-half 
done. 

The work is now sufficiently advanced to make it possible to estimate with some 
precision the total cost, which will amount to $1,427,000, including $80,000 for a 
freight yard, for a branch line between La Boca and the main line at Bomba, for an 
electric plant, for office buildings, and for the buoying of the basin. 

The Panama Canal Company, which undertook the most important part of the 
work, has agreed to accept this company’s 4i per cent first-mortgage bonds to an 
amount of $962,000 as security for advances made by it under said contract. 

The company will provide cash payments for the balance of $465,000 to be expended, 
and cover such outlays by the certification and issue of the necessary number of new 
4£ per cent bonds, to be placed in the treasury of the company. 

The board accordingly further resolved that the best interests of the company 
would be more adequately served by keeping in reserve the liquid assets now in the 
treasury of the company than by the distribution at this time of any dividend to the 
company’s stockholders. 


Assets and Liabilities. 

Statements A and B show the financial condition of the company on December 31, 
1897. 

The balance to the credit of profit and loss account of $2,713,920.70 is represented 
by assets and expenditures, as follows: 


Capital assets: 

Cost of road, real estate, and equipment.$9, 889, 394.19 

Steamers Allianga , Advance , and Finance . 329,069.27 

Tugs and lighters. 445, 779. 53 

New terminal at La Boca. 36,138.18 












































254 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Capital liabilities: 

Capital stock. $7,000, 000. 00 

41 per cent twenty-year sinking- 

fund gold bonds... 2, 000, 000. 00 

-$9, 000, 000. 00 


Capital assets over liabilities 


$1, 700, 381.17 


Other assets and expenditures: 

294 6 per cent Panama Railroad Company’s sub¬ 
sidy bonds.- - 294, 000. 00 

Expenditures for replacement of boilers and special 
repairs to floating equipment, not yet charged to 
earnings. 93,989.12 


Sundry accounts receivable and coal and supplies on 

hand.-. 

Less sundry liabilities. 


293, 828. 22 
264, 636. 07 


387, 989.12 


Balance. 34,192.15 

Cash on hand and with banks. 591,358. 26 


Total 


2, 713, 920. 70 


General Remarks. 


During the period from 1894 to 1897, inclusive, the percentage of operating 
expenses to gross earnings was as follows: 


1894 

1895 

1896 

1897 


Per cent. 
.. 69.96 
.. 61.63 
.. 53.94 
.. 61.12 


As already stated, the causes of the increase in operating expenses were: 

First. The appropriation of large sums for depreciation of the company’s floating 
equipment. 

Second. Improvements and betterments to the permanent way and structures of 
such a character as to have made it possible to carry part of the cost thereof to capi¬ 
tal account. 

Third. Increases in working expenses due to the prevalence of yellow fever during 
a part of the year. 

The two first items of increase in expenses were made possible by the company’s 
very satisfactory financial condition. 

The traffic affairs during the year call for no further special mention than is con¬ 
tained in the statistical statements to be found appended hereto concerning freight 
and passenger business of the railroad and steamships, with information as to the 
earnings and expenses, also statements regarding the railroad and floating equipments. 

During the year the company has been free from serious accidents of any kind, 
either on the railroad or the steamships. 

I desire to renew my thanks to the officers and employees of the company for 
their faithful and efficient services during the past year. 

Respectfully, G. Whaley, 

Vice-President and General Manager. 
























255 


I]S^ ESTIGATION OF PANAMA RAILWAY COMPANY. 


Table A .—Balance sheet , December 31, 1897. 


Resources. 

Cost of road, real estate, and equipment 

Floating equipment: . 

Steamers AUianqa, Finance, and Advance, value December 

ol, 1896 .. $336 655 50 

Installation of electric plants, providing new staterooms and 

other additions on all steamers. qq mq 77 


$9,889,394.19* 


Depreciation fund. 

Tugs and lighters, value December 31,1896 
Depreciation fund for tugs. 

New terminal at La Boca«. 


370,169.27 
41,100.00 

-$329,069.27 

447,879.53 
2,100.00 

- 445,779.53 


774,848.80 
36,138.18 


Total. 

^ reas,,r '’ 6 P er cent Panama Railroad Company sinking-fund subsidy 


On deposit with financial agents for redemption of bonds: 

6 per cent subsidy bonds. $44 qoo. 00 

General mortgage 7 per cent bonds and final coupon. 5, 032.66 


Advance of subsidy to Republic of Colombia. 

Fund for replacement oi boilers and special repairs to steamers and tugs . 

Current assets: 

Cash in banks and with agents. §591 358 26 

Coal and supplies on hand... "'"' * ng’ 824 91 

Uncollected earnings. !!!”!!”!!!".!!!! 50 ’ 986! 77 

Due from connecting companies. . 23 ’ 163! 92 

Due from United States Government.’"! 19 ’678 40 

Due from companies and individuals. !...!!!!.!! 5s’ 285! 91 

Accrued interest on deposits. ’ 746 .64 

Accrued interest on securities owned. 2 940.00 

Unadjusted accounts. !!!!!!!. 23 ’ 20l! 67 


10,700,381.17 
294, 000. oo 


49,032.66- 
1,732,000.00 
93,989.12 


890,186. 48 


Liabilities. 

Capital stock. 

4^ per cent twenty-year sinking fund gold bonds (authorized issue, $4,000,666) 


13,759,589.43 

$7,000,000. 00 
2,000,000.00 


Total capital stock and mortgage liabilities. 

6 per cent gold sinking fund subsidy bonds b . 

6 per cent gold sinking fund subsidy bonds drawn, not presented for payment: 


Drawn in 1896.. $1,000.00 

Drawn in 1897. 44,000.00 


Accrued interest on bonds: 

4i per cent first mortgage bonds. 22,500.00 

6 per cent subsidy bonds. 17 , 320 .00 


Funds for redemption of bonds: 

41 per cent first mortgage bonds 
6 per cent subsidy bonds. 

Due Republic of Colombia: 
Department of Panama.. 
Government of Colombia 


Current liabilities: 

Isthmus drafts not presented. 22,610.29 

Coupons not presented. 9,103.45 

Audited vouchers. 36,767.44 

Unclaimed dividends. 367 .00 

Due deceased or missing employees. 1,281.00 


Balance to credit of profit and loss 


21,875.00 
1,666.67 


62,500. 00 
67,875.00 


9,000,000.00 
1,732,000.00 

45,000. OO 
4,862.88 

39,820.00 

130,375. 00 

23,541.67 

* 

70,069.18 
2,713,920.70 


13,759,589.43 


« During 1897 indebtedness to the extent of $962,000 has been incurred on account of the construc¬ 
tion of the La Boca terminal. This sum, which will become due in 1902, is to be secured by an 
equivalent amount of the company’s new 4J per cent bonds as collateral, and its total may be reduced 
in the meantime at the option of the company by payments on account. 

&1,732 6 per cent gold sinking-fund subsidy bonds of $1,000 each, amounting to $1,732,000, issued 
November 1, 1880, fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Government subsidy was 
pledged till March 27, 1908, the same to be applied by the company: First, to the payment of the 
interest, and, second, as a cumulative sinking fund for the redemption of the principal: the bonds to 
be drawn yearly in September to an amount equal to the then surplus of the subsidy sinking fund, 
the drawn bonds to be paid on November 1, after each drawing, and thereby redeeming the whole 
issue in 1908. 

S. Deming, Treasurer. 



























































256 INVESTIGATION OF PANAMA RAILWAY COMPANY". 


Table B.— Profit and loss account, December 31, 1897. 
Debit. 


To operating expenses.$1,406,233.08 

Fixed charges. 484,598.80 

Cash balance of voluntary sinking fund for redemption of general mortgage 7 per 
cent sterling bonds transferred to the sinking fund for redemption of the 4£ per 

cent twenty-year sinking-fund gold bonds.. 36,771.62 

Discount and expenses for issue of 2,000 4? per cent twenty-year sinking-fund gold 

bonds. 23,535.73 

Value of locomotive No. 14. dismantled. 5,691.05 

Uncollectible accounts, charged off. 89.19 

Balance assets over liabilities, December 31,1897 . 2,713,920.70 


4,670,840.17 

Credit. 

By balance, December 31, 1896. $587,465.79 

Gross earnings. 2,300,705.25 

Income from other sources: 

Earnings of machine shops. 20,009.07 

Profit on coal and material.. 15,257.90 

Sale of old hulk Alma . 542.20 

Balance to credit of voluntary sinking fund, October 10, 1897, transferred to profit 
and loss account. 1,746,859.96 


4,670,840.17 


[Extracts from the forty-ninth annual report of the Panama Railroad Company.] 

New York, March 23, 1899. 

To the Stockholders of the Panama Railroad Company: 

Gentlemen: I respectfully submit for your consideration the report of the assistant 
general manager with accompanying statements of earnings and expenditures for 
the calendar year 1898, and the treasurer’s balance sheet and transcript of profit and 
loss account. 

In addition to the complete recital of the company’s business in 1898, furnished 
by attached reports, it appears necessary for me to state only that: 

The redemption of the company’s 7 per cent sterling bonds was entirely completed 
and the mortgage upon which it was effected canceled of record: and 

By the operation of the sinking-fund clause of the new \\ per cent gold bond 
mortgage (authorized issue of $4,000,000) the original issue of $2,000,000 has been 
reduced by redemption and cancellation of 141 bonds to $1,859,000, the present total 
of the company’s outstanding mortgage liability. 

A further issue of 962 of these bonds was authorized in order to provide as may be 
necessary for contract payments at maturity in 1902, or earlier, at the company’s 
option, on account of indebtedness incurred in the construction of the La Boca 
terminal. 

The 6 per cent subsidy bonds, due in 1910, have been reduced by redemption as 
provided by their sinking-fund clause from 1,732 to 1,611. 

The Pacific Mail Steamship Company availed, in September last, of its option to 
extend the contract of December 16, 1895, for a further period of two years tc 
December 16, 1900; and the contract of 1872 with that Company, which was an 
impediment to this company’s development, has been abrogated and canceled. 

A European department has been inaugurated and the company’s agency in San 
Francisco reestablished. 

The company’s business was seriously affected by the war with Spain, which, 
during its continuance caused an almost total suspension of passenger traffic by our 
steamship line, together with a loss of coastwise traffic, both ways. Business with 
our foreign connections was relatively impaired. Despite these unfavorable condi¬ 
tions, your directors decided it best for the company to continue to operate its line 
between New York and Colon (the vessels of which are of American registry) and 
to meet the large outlay necessary for war risk insurance upon the steamers. This 
was accordingly done, with no more serious interruption than an occasional delayed 
sailing from either end, and the enviable record established thereby that ours was 
the sole company with vessels sailing under the American flag which maintained its 
regular service throughout the war between this country and a foreign port, on the 
Atlantic Ocean, the actual field of belligerent operation. 

Revolutionary disturbances in South American republics and consequent loss of 
credit had a damaging effect during the year upon our foreign traffic, and the cost of 
operating our road was materially increased by an advance in wages to silver-pay 
employees at the Isthmus made to avert threatened labor troubles occasioned by a 
continued advance in rates of exchange. 


















INVESTIGATION OF PANAMA RAILWAY COMPANY. 


257 


Despite special adverse circumstances, the net earnings for the year, after pay¬ 
ment of everything due, represent nearly 4 per cent upon the capital stock 
($/,000,000),. but it is deemed prudent for the present by your directors that no 
distribution in dividends should be made to the stockholders* 

I refer you to the accompanying reports for further particulars. 

Respectfully submitted. 

J. Edward Simmons, President. 


Panama Railroad Company, 

New York , March 15, 1899. 

To the President of the Panama Railroad Company: 

Sir: I respectfully submit the following report of the business and operations of 
the Panama Railroad Company for the year ending December 31, 1898, and of the 
condition of the company’s property and finances at the close of the year. 

The operations of the year show the following results: 


Statement of earnings and expenditures. 


EARNINGS. 

Railroad: 

Colon to Panama— 

Freight. 

Treasure . 

Mails. 

Extra baggage. 

Passengers. 


Panama to Colon— 

Freight. 

Treasure. 

Mails. 

Extra baggage. 
Passengers. 


Total earnings of railroad .... 

Panama Railroad Steamship Line- 

Freight . 

Treasure. 

Mails. 

Extra baggage. 

Passengers. 

Miscellaneous. 


Joint railroad and steamship receipts— 

Interest and exchange. 

Lighterage. 

Water supplied shipping. 

Rental of property. 

Wharfage, storage, and light dues.. 

Telegraph. 

Miscellaneous. 

Earnings of machine shops. 

Profit on coal and material. 


Total earnings. 

EXPENDITURES. 

Operating expenses of railroad: 

General expenses on Isthmus. 

Conducting transportation. 

Maintenance of equipment. 

Maintenance of way and structures 


1898. 

1897. 

Increase. 

Decrease. 

$527,872. 84 
5,129.63 
39,667.14 
. 7,926.61 

41,811.54 

$637, 768.25 
5,618.25 
40,808. 40 
8,216. 96 
43,950.42 


$109,895.41 
488. 62 
1,141.26 
290.35 
2,138.88 






622,407.76 

736, 362.28 


113,954.52 


413,015.60 
17,229.25 
5,275.11 
7,039.22 
41,493.43 

435,633.89 
16,612.18 
5,014. 30 
6,028.95 
42,291.04 


22,618.29 

$617.07 
260.81 
1,010. 27 



797.61 


484,052.61 

505,580.36 


21,527.75 


1,106,460.37 

1,241, 942. 64 


135,482. 27 


478, 731.82 
10,037.97 
50, 917.78 
1, 285.64 
74,891.20 
4,319.53 

484,160. 31 
9,274.24 
56,405.69 
2,049.19 
111,781.06 
6,816. 50 


5,428.49 

763.73 

5,487. 91 
763. 55 
36,889. 87 
2,496.96 





620,183.94 

670,486.99 


50,303.05 


77, 651. 39 
181,978.01 
15,406.42 
16,848.45 

40.180.15 
10,956. 65 

1,558.67 

36.420.15 
35,236.97 

44,263. 48 
217,604.18 
56,886.14 
17,094.04 
47,225.56 
3,153.25 
2,048.97 

33,387.91 


35,626.17 
41,479.72 
245.59 
7,045.41 




7,803.40 

490. 30 

36,420.15 
35,236.97 





416,236.86 

388,275.62 

27,961.24 



2,142,881.17 

2, 300, 705. 25 


157,824.08 


41,036.49 
259,886. 66 
69,919.09 
129,595.18 

39, 784.46 
246,686. 30 
67,406. 99 
121,531.19 

1,252.03 
13,200.36 
2,512.10 
8,063. 99 






500,437.42 

475,408.94 

25,028.48 




PAN RY— 05-17 











































































































258 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Statement of earnings and expenditures —Continued. 


exx j enditures— continued. 

Panama Railroad Steamship Line: 

Steamer expenses.. 

Replacement of boilers and special repairs. 

Depreciation of steamers. 

Agency expenses. 

Charter of steamers. 


Joint railroad and steamship expenses: 

General expenses.. 

Foreign agency expenses. 

Losses on cargo. 

Drawback on Colombian produce. 

Republic of Colombia for nonextension of 

road. 

Lighterage. 

Replacement of boilers and special repairs 

to tugs. 

Depreciation of tugs. 

Docks and wharves. 

Real estate and repairs to Colon buildings. 
Taboga waterworks. 


Total expenditures. 

Earnings over operating expenses. 


Deduct fixed charges: 

Subsidy to Republic of Colombia.... 

Redemption of subsidy bonds. 

Interest on subsidy bonds. 

Interest on sterling bonds. 

Interest on first mortgage bonds .... 
Redemption of first mortgage bonds. 


Net income 


1898. 


$399,459. 46 
57,000.00 
41,100. 00 
101,613.52 


97,864.15 
6,086.57 
5,589. 24 
19, 523. 07 

10 , 000.00 

97, 790.52 

3,000.00 
2 , 100.00 
30,344. 59 
16,446. 71 
2,537.94 


1897. 


$370,097.33 
57, 000. 00 
41,100.00 
101,622.62 
13, 316. 67 


Increase. 


$29,362.13 


599,172. 98 ; 583,136. 62 


94,491. 64 
8,405.56 
23, 806. 77 
19,102.12 

10 , 000.00 

105,804.28 

3, 000.00 
2,100.00 
34,981.75 
15,123.03 
30.872. 37 


16,036. 36 


3,372.51 


420.95 


291,282.79 347,687.52 


1,390,893.19 i 1,406,233.08 


751,987.98 894,472.17 


25, 000. 00 
121,080.00 
103,920. 00 


85,241.25 
150, 000.00 


4S5,241.25 


266, 746. 73 


1,323.68 


25,000.00 
113,240.00 
111,760.00 
186, 370. 42 
22, 500. 00 
25, 728.38 


484,598.80 


409,873.37 


7,840.00 


62,741.25 

124,271.62 


642.45 


Decrease. 


$9.10 
13,316.67 


2,318. 99 
18,217. 53 


8,013. 76 


4,637.16 


28, 334.43 


56,404.73 


15,339.89 


142,484.19 


7,840.00 
186,370. 42 


143,126.64 


Gross revenue receipts, expenditures and net earnings for 1898, compare, as under, 
with those of 1897: 



Earnings. 

Expenses. 

Net earnings. 

1897. 

$2,300, 705.25 
2,142,881.17 

$1,406,233. 08 
1,390, 893.19 

$894,472.17 
751,987.98 

1898. 

Decrease in 1898. 

157 . 824.08 

15 . 339 . 89 

142,484.19 
642.45 

Increase in fixed charges 1898..... 


Decrease in profit 1898. 

143,126. 64 



EARNINGS. 

Railroad. 

The total net decrease of earnings of the railroad proper in 1898 as compared with 
1897 of $135,482.27, or 10.91 per cent, results principally from east and west bound 
freight and passengers. 

The large falling off was due to a continuance in 1898 of the disturbing trade con¬ 
ditions in Central and South America, which so seriously affected the'company’s 
traffic, in 1897, as shown by the fact that decreases in cargo Vest bound over our road 
from all points to points on the Pacific coast aggregated nearly 30,000 tons, and east- 
bound cargo to all points from Pacific coast points shows a reduction of almost 13,000 
tons. This combined loss was, however, offset by important increases to and from 
particular points, resulting as shown in Table No. 4. 









































































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


259 


The most important decrease was in cargo, to points in Central America of 21 000 
tonsfrom Europe and 3,400 tons from New York. ’ ,UUU 

relaW C d^?«°J^ ? onsu \ ar commercial, received from that territory confirm 
wrdnn iT imports, thus accounting for our loss of traffic as not caused by 
veision to otner routes. 

* decline in imports was owing to reduced production of raw products, due 

to revolutionary outbreaks, together with a fall in value of those products in foreign 
markets, added to a depreciation in silver (the money basis of the country) which 
resulted in disturbing credit and limiting purchase power. 

Decreases to and from New York were almost entirely due to the Spanish-American 
war, as the vessels of our steamship lines are of American registry. 

There was a decrease of 15.48 per cent in earnings on west-bound business and of 
4.26 per cent on east-bound business. 

The following table shows the freight tonnage carried over the railroad in 1898 as 
compared with 1897: 

[Per ton of 2,000 pounds, or 40 cubic feet.] 



Year end¬ 
ing De¬ 
cember 
31, 1898. 

Year end¬ 
ing De¬ 
cember 
31, 1897. 

Increase. 

Decrease. 

West bound. 

Tons. 
144,182 
123,974 

Tons. 
173,345 
117,306 

Per cent. 

Per cent. 
16.82 

East bound. 

Total. 

5.68 

268,156 

290,651 


7.74 




The gross earnings per ton moved on the road compare as follows: 


Year end- 

t ing De¬ 

cember 
! 31, 1898. 

Year end¬ 
ing De¬ 
cember 
31, 1897. 

Decrease. 

Westbound... 

$3.66 
3.33 

S3.68 
3.71 

Per cent. 
0.54 
10.24 

East bound. 

Average.:. 

3.51 

3.69 

4.88 



Decreases in west-bound tonnage occurred on traffic from Europe to Central Amer¬ 
ica, Mexico, San Francisco, and South Pacific ports to and including Guayaquil, 
while there was an increase on freight destined to Panama and South Pacific ports 
other than above. 

The total freight tonnage east-bound increased 6,668 tons, or 5.68 per cent, the prin¬ 
cipal increase being on traffic from South Pacific ports for both New York and 
Europe. The most important decreases were from Central America to Europe and 
New York, from Panama to Europe, and from San Francisco to New York, the last 
of 4,581 tons, or about 27 per cent, was the result more of inability to agree with our 
cocarrier upon effective rates to meet competition than to other trade conditions 
affecting our route, as shown by an increase New York to San Francisco of 3,198 
tons, or about 12 per cent. 

Table No. 4, attached to this report, shows origin and destination of the freight 
carried over the railroad, and Table No. 9 gives the classification of freight from the 
Pacific coast destined to all ports. 

Compared with 1897, the total tonnage carried over the road in 1898 shows a 
decrease of 22,495 tons, or 7.74 per cent, and the earnings a decrease of $132,513.70, 
or 12.35 per cent. 

Of the total tonnage carried, 53.77 per cent was west bound and 46.23 per cent east 
bound. In 1897 these proportions were 59.64 per cent and 40.36 per cent, respec¬ 
tively. 

Through freight amounted to 84.16 per cent of the total number of tons carried, 
against 82.93 per cent in 1897. 

In 1898 there was an increase of $128.45, or 0.58 per cent, on treasure; of $719.92, 
or 5.05 per cent, on excess baggage, and a decrease of $880.45, or 1.92 per cent, on 
mails. 

The following statements show the number of passengers carried and the passenger 
earnings. 






























260 


INVESTIGATION OF PANAMA KAILWAY COMPANY. 


Number of passengers carried. 


Classification. 

1898. 

1897. 

Increase. 

Decrease. 

First Glass .. 

4,868 
112, 936 

5,111 
104,813 

Per cent. 

Per cent. 
4.75- 

Spoon (I class . 

7.75 


Total .. 

117,804 

109,924 

s 



— 


Classification. 

Passenger earnings. 

1898. 

1897. 

Decrease. 

First class . 

825,106.90 
58,198.07 

827.030. 60 
59,210.86 

Per cent. 
7.12 
1.71 

Second class . . 

Total . 

83,304.97 

86,241.46 

3.40* 



AVERAGE RECEIPT PER PASSENGER. 


Classification. 


First class: 
Through . 
Local 

Second class: 
Through . 
Local 




1898. 

1897. 

Increase. 

Decrease. 



Per cent. 

Per cent. 

88.89 

88.91 


0.22 

2.91 

2.87 

1.39 


4.59 

4.47 

2.68 


.,9 

.52 


5. 77 


The number of first-class passengers carried shows a decrease qf 243, or 4.75 per 
cent, and $1,923.70, or 7.12 per cent, in revenue. This falling off was occasioned by 
the effects upon the through, passenger business of the [Spanish-American war. 
There was an increase of 8,123, or 7.75 per cent, in the number of second-class pas¬ 
sengers carried, although there is a loss in revenue of $1,012.79, or 1.71 per cent. 

STEAMSHIP LINE. 

The earnings of the steamship line show a decrease of $50,303.05, or 7.5 per cent, 
as compared with those of 1897. The increases and decreases quarterly are as 
follows: 



Increase. 

Decrease. 

First quarter. 

814,364.02 


Second quarter. 

855,396.50 
26,989.20 

Third quarter.. 


Fourth quarter. 

17, 718. 63 

Total. 


32,082. 65 

82,385.70 



making net decrease in revenue of $50,303.05 for the year, as mentioned above. 

From this it will be seen that the decrease in earnings occurred during the period 
from April to September, while the Spanish-American war was in progress. 

All classes of earnings except treasure show a decrease, the most important being 
for passengers, which amounts to $36,889.86, or 33 per cent, the traveling public hav¬ 
ing been deterred from using our steamers by fear of the Spanish fleet in the AVest 
Indian waters. 


JOINT RAILROAD AND STEAMSHIP RECEIPTS. 

These receipts show an increase of $27,961.24, or 7.20 per cent, resulting from an 
increase in interest and exchange of $33,387.91, or 75.43 per cent; an increase in tele¬ 
graph receipts of $7,803.40, or 247.47 per cent, due to war message service; and by 
accumulated earnings of machine shops and from sales of coal and material for the 
years 1896, 1897, and 1898, now definitely carried to earnings; to offset which there 
are decreases in lighterage receipts of $35,626.17, or 16.37 per cent, of $7,045.41, or 


















































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


261 


14.92 per cent, for wharfage, storage, and light dues, owing to loss of through tonnage; 
and of receipts from water supplied shipping, amounting to $41,479.72, or 72.92 per 
cent, chiefly because our service at Taboga waterworks, in Panama Bav, was discon¬ 
tinued after January. 

The following table will show the number of tons lightered during the years 1898 
and 1897: 



1898. 

1897. 

Increase. Decrease. 

Merchandise. 

Tons. 
142,536 
872 
1,963 

Tons. 

173,212 

66 

2,731 

Per cent. Per cent. 

17 71 

Lumber. 

1 221 21 

€oal. 

28 12 

Total. 


145,371 

176,009 

17 41 




EXPENDITURES. 

The revenue expenditures of 1898 and 1897 compare as under: 


Railroad. 

Steamship line. 

Joint railroad and steamship expenses 

Total expenses. 


1898. 

1897. 

Increase. 

Decrease. 

$500,437.42 

599,172.98 

291,282.79 

$475,408.94 
583,136.62 
347,687.52 

$25,028.48 
16,036.36 



$56,404.73 


1,390,893.19 

1,406,233.08 


15,339.89 



This table shows there is a decrease of $15,339.89 in total revenue expenditures 
against a decrease of $157,824.08 in earnings. 

This decrease in total expenditures, apparently so disproportionate to the loss of 
traffic for the year, elsewhere herein accounted for, can be partially explained by the 
necessity for maintaining plant and service in an efficient condition in anticipation 
of resuming active operations, notwithstanding serious temporary variations in the 
volume of traffic and, further, by increase in outlay for maintenance of way, struc¬ 
tures, and equipment, added to a temporary increase in cost of conducting transporta¬ 
tion, due to an advance of 25 cents silver per day to all classes of silver pay employees. 


CONDUCTING TRANSPORTATION. 

This account shows an increase of $13,200.36, or 5.35 per cent, due to the advance 
•of 25 cents silver per day in wages above referred to. 

MAINTENANCE OF EQUIPMENT. 

The increase in this department, amounting to $2,512.10, or 3.73 per cent, is due 
almost entirely to extensive repairs to freight cars. 

MAINTENANCE OF WAY AND STRUCTURES. 


Reballasting road and renewing cross-ties and rail fastenings, begun in 1897, was 
continued in 1898, which, together with the increase in wages referred to, accounts 
for an increase in this department of $8,063.99, or 6.64 per cent. 

STEAMSHIP LINE. 

There is an increase of expenditure in this department, amounting to $16,036.36, or 
2.75 per cent, which is accounted for by the added cost of war-risk insurance on 
steamers, which were continuously operated during the Spanish-American war, 
amounting to $37,031.21. But for this compulsory outlay, which caused an increase 
in steamer expenses of $29,362.13, or 7.93 per cent, there would have been a net 
decrease of about $21,000 in cost of operations between New York and Colon after 
making the same allowance in both years for “replacement,” “special repairs” to 
and “depreciation in value” of steamships. 










































262 


INVESTIGATION OF PANAMA RAILWAY COMPANY 


Repairs in deck and commissary departments of the steamers were $19,936.05 less 
than in 1897; against which there was an increase of $4,971.38 in engine department 
repairs; in cost of fuel of $2,841.61; labor on cargo, $8,606.02; labor on coal, $2,477.03, 
and wages, $4,142.14, owing to steamers making 37 round trips in 1898 instead of 36, 
as in 1897. The increase in cost of labor on cargo was due to the larger quantity of 
freight handled and to overtime caused by turning the ships around more quickly. 

FLOATING EQUIPMENT. 

Owing to the discontinuance during the year of our Taboga water service in Panama 
Bay consequent upon the installation there by the Pacific Mail Steamship Company 
of its own plant, the water launch and tugs Balboa and Ancon have been laid up, but 
kept in good repair. 

At Colon a new floating pile driver, 60 by 30 by 5 feet, with a drop of 50 feet, was 
constructed of wooden hull, copper sheathed. 

The lighterage plant was kept in good condition. 

JOINT RAILROAD AND STEAMSHIP EXPENSES. 

These expenses show a decrease of $56,404.73, or 16.22 per cent, for the year as 
compared with 1897, after making the same allowance in both years for “replace¬ 
ment” and “special repairs.” as well as for “depreciation in value of tugs,” etc. 
This is accounted for by a decreased outlay for losses on cargo, foreign agency 
expenses, lighterage (due to decreased tonnage lightered), repairs to docks, wharves, 
and cessation of Taboga water service. 

Increases resulted in certain items on account of clerical additions to agency and 
department forces. 

CAPITAL ACCOUNT. 

The $2,000,000 new 4i per cent first-mortgage sinking-fund gold bonds, issued on 
September 15, 1897, were supplemented by a further issue of $962,000, authorized on 
September 22, 1898. The total was reduced by the redemption, principal and 
interest, of 141 bonds, under the provision of the sinking-fund clause of the mort¬ 
gage. The following table shows the changes in capital account for the year: 



Capital stock. 

41 percent first- 
mortgage gold 
bonds. 

Outstanding December 31,1897. 

$7,000,000 

$2,000,000' 
962,000 

2,962,000 
141,000 

2,821,000 

821,000 

41 per cent first-mortgage gold bonds issued... 

Total. 

7,000,000 

Retired during the year. 

Outstanding December 31, 1898. 

Increase . 

7,000,000 




The details of receipts and expenditures on capital account are shown in the fo. , 
lowing table: 


Credit. 

Cost of 481 flat and coal cars disman¬ 


tled during the year. $85,418.66 

Depreciation of steamers and tugs... 43,200.00 

Balance, charges in excess of cred¬ 
its. 1,131,267.59 


1,259,886.25 


Debit. 


New terminal at La Boca.$1,171,072.20 

La Boca branch, electric-light plant, 

office buildings, etc. 81,386.02 

New floating pile driver. 7,428.03 


1,259,886.25 


One hundred and twenty-one of the outstanding 1,732 6 per cent sinking-fund 
subsidy bonds were drawn in September and redeemed November 1. 

Continued progress was made during the year in completing the new terminal port 
and pier at La Boca, in the Bay of Panama, which, as now almost finished, consists 
of a magnificent pier 1,000 feet long. 50 feet wide, constructed on 24 solid cement 
piers founded on bed rock, shedded its entire length, with 5 large steam hoisting 
cranes and one 15-ton derrick crane, with which to discharge or load 3 large ships at 
one time. 

Basins have been excavated alongside the pier of sufficient size to allow a free 




























INVESTIGATION OF PANAMA RAILWAY COMPANY. 


268 


movement of vessels of 3,000 tons capacity, and to allow such vessels to be safely 
berthed there at all stages of a tide which has an average rise and fall of 21 feet. 

Cargo will be rapidly transferred directly to and from cars on the pier, which is 
connected by a branch road with the main line. 

On the pier and mainland adjoining there have been' newly constructed and 
installed an ample train yard, water plant for pier and ships, electric-light plant, 
treasure vault, telephone and telegraph lines, track scale and engine shed, and office 
buildings. 

An experienced working force is on the ground, and the port captain and freight 
agent’s residence is near by. 

It was estimated in 1897 that the total cost of construction for the port, pier, and all 
appurtenances would be $1,389,000, and it is to be noted that that figure has not been 
reached, expenditures made or contracted to be made amounting to $1,288,597.40 for 
the period covered by this report. 

Of this indebtedness but $36,138.18 appeared in the company’s balance sheet for 
December 31, 1897, that amount only having been duly verified and recognized in 
account up to that date. 

During 1898 indebtedness to the Panama Canal Company for construction of the 
almost completed terminal was regularly established in account up to July 1, 1898, 
amounting to $1,139,586.22, which amount was later reduced, by payment of interest 
up to that date, to $1,098,617.88. 

Of this amount $962,000 is due in 1902, unless paid earlier at the company’s option, 
and is secured by the deposit of an equivalent number of the company’s new 4£ per 
cjent gold bonds. 

The balance, $136,617.88, is due in 1900, and can be easily met from current earn¬ 
ings. 

At this writing the pier, with its accessories, is ready for actual operation; in fact 
a large number of launches have already been discharged there. 

It is expected that arrangements will be shortly consummated with connecting lines 
providing for the permanent discharging and loading of their steamers at the pier 
hereafter. 

A large number of flat cars, required for traffic in connection with active canal 
operations prior to 1890, which, since then, not being in use, had become unservice¬ 
able, were dismantled, and their cost, less the value of material remaining, written 
off of capital account to profit and loss. 

These cars had not appeared in rolling stock equipment reports since 1894. 

Assets and Liabilities. 

Statements A and B show the financial condition of the company December 31, 
1898. 

The balance to the credit of profit and loss account of $2,971,448.51 is represented by 
assets and expenditures, as follows: 

Capital assets: 

Cost of road, real estate, and equipment. $9, 778,905. 81 


New terminal at La Boca. 1, 207, 210. 38 

La Boca branch, electric-light plant, office build¬ 
ings, etc.. 81, 386.02 

Steamers Allianqa, Advance , and Finance . 287, 969. 27 

Tugs, lighters, and floating pile driver. 451,107. 56 


11, 806, 579. 04 

Capital liabilities: 

Capital stock.$7,000, 000. 00 

4^ per cent twenty-year sinking-fund 
"gold bonds (less 962 bonds in 

treasury). 1, 859,000.00 

Due contractors, new terminal at 

La Boca. 1,098,617.88 

- 9,957,617.88 


Capital assets over liabilities. $1,848,961.16 

Other assets and expenditures: 

270 6 per cent Panama Railroad Company’s subsidy 

bonds.-.270,000.00 

Expenditures for replacement of boilers and special 

repairs to floating equipment. 33,989.12 


303,989.12 

















264 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Sundry accounts receivable and coal and supplies on 

hand. $388, 943. 96 

Sundry liabilities. 251, 773. 31 


$137,170. 65 
681, 327. 58 


Balance. 

Cash on hand and with banks 


Total 


2, 971,448. 51 


GENERAL REMARKS. 


During the period from 1894 to 1898, inclusive, the percentage of operating expenses 
to gross earnings was as follows: 

Per cent. 


1894 

1895 

1896 

1897 

1898 


69. 93 
61.63 
53. 94 
61.12 
64. 91 


The causes of the increase in operating expenses were: 

First. The appropriation of large sums for depreciation of the company’s floating 
equipment. 

Second. Important increases in expenditures for maintenance of way and structures 
begun in 1897 and continued in 1898. , 

Third. Increases in expenses due to advance in wages to silver-pay employees on 
the Isthmus. 

Fourth. Increase in cost of operation of the company’s steamship line due to war- 
risk insurance. 

The company’s accounts since its incorporation in 1849 to December 31, 1897, have 
been examined and certified as correct up to that date by expert accounting. 

The traffic affairs during the year call for no further special mention than is con¬ 
tained in the statistical statements to be found appended hereto concerning freight 
and passenger business of the railroad and steamships, with information as to the 
earnings and expenses, also statements regarding the railroad and floating equipments. 

During the year the company has been free from serious accidents of any kind, 
either on the railroad or the steamships. 

I take pleasure in acknowledging the hearty support and cordial assistance of the 
company’s officers and employees in the performance of my duties, and in testifying 
to their efficiency and loyalty to the company’s interests. 

Respectfully, 


E. A. Drake, 
Assistant General Manager. 


Table A. —Balance sheet, December 31, 1893 

RESOURCES. 


Cost of road, real estate and equipment. 

New terminal at La Boca. 

La Boca branch, electric-light plant, office buildings, etc. 

Floating equipment: 

Steamers Allianqa , Finance, and Advance reduced value 


December 31, 1897. $329,069.27 

Depreciation fund.. 41,100.00 

-$287,969.27 

Tug and lighters, reduced value December 31,1897. 445,779.53 

Depreciation fund for tugs. 2,100.00 

- 443, 679. 53 

New floating pile driver... 7,428.03 


$9, 778,905.81 
1,207,210.38 
81,386.02 


739,076.83 


Total. 

Bonds in treasury: 

270 6 per cent Panama Railroad Company sinking-fund subsidy bonds. 270,000.00 
962 4i per cent twenty-year gold sinking-fund bonds.. 962,000.00 


On deposit with financial agents for redemption of bonds: 

6 per cent subsidy bonds. 12,000.00 

41 per cent gold sinking-fund bonds... ’ 69l! 52 


Advance of subsidy to Republic of Colombia.. 

Fund for replacement of boilers and special repairs to steamers and tugs 


11,806,579.04 


1,232,000.00 


b 


12, 691. 52 
611,000. 00 
33,989.12 



































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


265 


Current assets: 

Cash in bank and with agents. 

Coal and supplies on hand. 

Due from connecting companies_ 

Due from United States Government 
Due from companies and individuals 

Accrued interest on deposits. 

Accrued interest on securities owned 

General average accounts. 

Unadjusted accounts. 


$681,327.58 
135,149.00 
123,155. 20 
14,934.69 
73,795.15 
1,596.84 
2, 700.00 
15,614.12 
21,998.96 

-SI, 070,271.54 


LIABILITIES. 


15,766,531.22 


Capital stock. 

4£ per cent twenty-year sinking-fund gold 

Issued to date. 

Redeemed and canceled. 


bonds (authorized issue, $4,000,000): 

. $2,962,000.00 

. 141,000.00 


$7,000.000.00 

2,821,000.00 


Total capital stock and mortgage liabilities. 

6 per cent gold sinking-fund subsidy bondsn.. 

Due contractors, new terminal at La Boca ft. "!"”!!!* 

6 per cent gold sinking-fund subsidy bonds drawn, not presented for 


payment: 

Drawn in 1897. \ 000 00 

Drawn in 1898.12* 000l 00 


Accrued interest on bonds: 

41 per cent twenty-year gold bonds (1859 bonds). 20,913.75 

6 per cent subsidy bonds. 16,110 00 


Funds for redemption of bonds: 

41 per cent twenty-year gold bonds. 63,191.52 

6 per cent subsidy bonds. 69,’ 165.00 


Due Republic of Colombia : 

Department of Panama. 21,875.00 

Government of Colombia.~i’ 666! 67 


Current liabilities: 

Isthmus drafts not presented. 21,350.84 

Coupons not presented.' 5 ’ 133.30 

A udited vouchers.1.’. 30 ^ 325 ! 60 

Unclaimed dividends... ’ 307.00 

Due deceased or missing employees. 1,42l! 15 


Balance to credit of profit and loss 


9,821,000. 
1,611,000. 
1,098,617. 


13, 000.00 


37,023. 75 


132,356.52 


23,541. 67 


58,542.89 
2, 971,448.51 


15,766,531.22 

Table P>. — Profit and loss account, December 31, 1898. 

DEBIT. 


To operating expenses. $1,390,893.19 

Fixed charges. 485,241.25 

Cost of 481 flat and coal cars dismantled during year, less value of material fit for 

use. 85,418.66 

Adjustment of coal, machine shops, and supply accounts. 55,561.04 

Difference between coffee and cocoa rebates of previous years, and amounts set 

aside out of earnings to meet same... 5,137.17 

Expenses, 4i per cent twenty-year sinking-fund gold bonds. 3,592.40 

Uncollectible and old accounts, charged off. 509.65 

Balance, assets over liabilities, December 31, 1898. 2,971,448.51 


4,997,801.87 


a 1.611 6 percent gold sinking fund subsidy bonds, of $1,000 each, amounting to $1,611,000, issued 
November 1, 1880, fall due November 1, 1910. 

ft Of this amount $962,000 will become due in 1902 and is secured by an equivalent amount of the 
eompany’s new 41 per cent bonds as collateral; $113,792.98 becomes due March 31, 1900. and $22,824.90 
on June 30, 1900. The total may be reduced in the meantime at the option of the company by pay¬ 
ments on account. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Government subsidy was 
pledged till March 27, 1908, the same to be applied by the company: First, to the payment of the 
interest, and second as a cumulative sinking fund for the redemption of the principal: the bonds to 
be drawn yearly in September to an amount equal to the then surplus of the subsidy sinking fund, 
the drawn bonds to be paid on November 1, after each drawing, and thereby redeeming the whole 
issue in 1908. 


S. Deming, Treasurer. 


8088 



















































266 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


CREDIT. 

By balance, December 31, 1897. $2,713,920.70 

Gross earnings. 2,142,881.17 

4? per cent twenty-year sinking-fund gold bonds, redeemed. 141,000.00 


4,997,801.87 
S. Deming, Treasurer. 


[Extracts from the fiftieth annual report of the Panama Railroad Company.] 

New York, March 22, 1900. 

To the Stockholders of the Panama Railroad Company. 

Gentlemen: I present for your consideration the report of the general manager, 
and the accompanying statement of earnings and expenditures for the calendar year 
1899, and the treasurer’s balance sheet and transcript of profit and loss account. 

In addition to the complete statement of the company’s business furnished by the 
reports attached, I may call to your attention that— 

The new 4£ per cent first-mortgage gold bonds have been reduced by redemption, 
as provided by the sinking-fund clause from $2,821,000 to $2,681,000 of such bonds. 

The 6 per cent subsidy bonds due in 1910 have been reduced by redemption as 
provided by the sinking-fund clause from $1,611,000 to $1,482,000 of such bonds. 

During the past year the completion of. the company’s new terminal at La Boca 
was announced, and the port and pier was declared open to commerce; nevertheless 
work has been steadily continued in deepening the sea approach to and the basins 
adjoining the pier to accommodate even larger ships than now call at Panama. 

A survey of the port and its approach by the United States Hydrographic Office 
has just been completed, and the publication of char'.s is expected. 

The development of Pacific coast traffic has increased the number of steamship 
lines engaged in calling at ports north of Panama, some of which are seeking to 
oblige the company to grant them general through billing privileges. It is a part of 
the company’s policy to increase the number of its cocarriers on both oceans at the 
earliest favorable opportunity. 

The contract of December 16, 1895, with the Pacific Mail Steamship Company 
expires by limitation in December next, 

I can not too seriously dwell upon the important advantages certain to result from 
a development of the company’s steamship line by the construction of at least three 
modern American steamers suited to the company’s trade; in fact, such action is ren¬ 
dered almost imperative in order to retain our present business against increasing 
competition, as well as to provide for the increase in traffic which is assured. 

The company’s land department has been reorganized and placed in charge of 
competent officials. 

The general manager visited the Isthmus toward the close of the year, and a 
report of his careful inspection of the company’s property is on file. 

The net earnings for the year, after payment of everything due, represent some¬ 
thing over 4 per cent upon the capital stock ($7,000,000), but it is deemed prudent 
by your directors that no distribution in dividends be made at present to the 
stockholders. 

The company has arranged to remove its New York offices to No. 24 State street 
on May 1 next, and to consolidate there its present force of general and pier offices’ 
employees so as to afford better facilities to our patrons and reduce expenses. 

I refer you to the accompanying reports for further particulars. 

Respectfully submitted. 

J. Edward Simmons, President. 


Panama Railroad Company, 

New York, March 15, 1900. 

To the President of the Panama Railroad Company. 

Sir: I respectfully submit the following report of the business and operations of 
the Panama Railroad Company for the year ending December 31, 1899, and of the 
condition of the company’s property and finances at the close of the year. 








267 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 

The operations of the year show the following results: 

Statement of earnings and expenditures. 


EARNINGS. 

Railroad: 

Colon to Panama— 

Freight. 

Treasure . 

Mails. 

Extra baggage. 

Passengers. 


Panama to Colon- 

Freight ... 

Treasure . 

Mails. 

Extra baggage. 
Passengers. 


Total earnings of railroad. 

Panama Railroad Steamship Lines— 

Freight. 

Treasure . 

Mails. 

Extra baggage. 

Passengers. 

Miscellaneous... 


Joint railroad and steamship receipts— 

Interest and exchange. 

Lighterage. 

Water supplied shipping. 

Rental of property. 

Wharfage, storage and light dues... 

Telegraph. 

Miscellaneous. 

Earnings of machine shops. 

Profit on coal and materials. 


Total earnings. 

EXPENDITURES. 

Operating expenses of railroad— 

General expenses on Isthmus_ 

Conducting transportation. 

Maintenance of equipment. 

Maintenance of way and structures 


Panama Railroad Steamship Line— 

Steamer expenses. 

Agency expenses. 

Charter of steamers. 


Joint railroad and steamship expenses— 

General expenses. 

Foreign agency expenses. 

Losses on cargo. 

Drawback on Colombian produce. 

Literage. 

Docks and wharves. 

Real estate and repairs to Colon buildings.. 
Taboga waterworks. 


Total operating expenses. 

Earnings over operating expenses 


1899. 

1898. 

Increase. 

Decrease. 

$526,382.19 
6,668.44 
41,648.47 
6,827.62 
30, 677.08 

$527,872.84 
5,129.63 
39, 667.14 
7, 926.61 
41,811.54 


$1, 490.65 

$1,538.81 
1,981.33 


1,098. 99 
11,134.46 



612,203.80 

622,407. 76 


10,203.96 


427,655.12 
15, 702.09 
4,871.58 
5,564.88 
32, 969. 39 

413,015.60 
17, 229.25 
5,275.11 
7,039.22 
41,493.43 

14,639.52 


1,527.16 
403. 53 
1,474.34 
8,524.04 





486, 763.06 

484,052. 61 

2,710.45 



1,098,966.86 

1,106,460. 37 


7,493.51 


594,131.92 
7, -502.21 
53,189. 72 
1,949.85 
100, 621.00 
5,075.38 

478, 731.82 
10,037.97 
50, 917. 78 
1,285. 64 
74,891. 20 
4,319.53 

115,400.10 


2,535. 76 

2,271.94 
664.21 
25,729.80 
755.85 





762,470.08 

620,183.94 

142,286.14 



43,290.46 
182.819.18 
13,814.20 
16, 751.53 
38,092.13 
3,633.85 
1,580.84 
11,971.02 
21, 621.81 

77, 651.39 
181,978.01 
15,406.42 
16,848.45 
40,180.15 
10,956. 65 
1,.558.67 
36, 420.15 
35,236. 97 


34,360.93 

841.17 

1,562.22 
96.92 
2,088.02 
7,322.80 


. 

22.17 

24,449.13 
13,615.16 



333,605.02 

416,236.86 


82,631.84 


2,195,041.96 

2,142,881.17 

52,160. 79 



42,090.14 
278,961.09 
71,269.44 
95,420. 52 

41,036. 49 
259,886.66 
69,919.09 
129,595.18 

1,053.65 
19,074.43 
1,350.35 




34,174. 66 


487, 741.19 

500,437.42 


12,696.23 


421,952.82 
110, 362. 40 
47,515. 38 

399,459.46 
101,613.52 

22,493.36 
8,748 88 
47,515.38 






579,830. 60 

501,072.98 

78,757. 62 



94,622.88 
6,639.81 

2.272. 81 
21,081.82 
111,270.28 
22,111.75 
16, 792. 46 
20.00 

97,864.15 
6,086. 57 
5,589.24 
19,523.07 
97, 790. 52 
30,344.59 
16,446. 71 

2,537.94 


3,241 27 

553.24 

3,316.43 

1,558.75 
13,479. 76 


8,232.84 

345.75 

2,517.94 


274,811.81 

276,182. 79 


1,370.98 


1,342,383. 60 

1,277,693.19 

64,690.41 



852,658.36 
- 1 

865,187,98 


12, 529.62 























































































































































268 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Statement of earnings and expenditures —Continued. 


1899. 


expenditures— continued. 


1898. 


Increase. ! Decrease. 


Taxes, and appropriations for depreciation 
and special repairs of steamers and tugs— 
Republic of Colombia for nonextension of 

road.. 

Depreciation of steamers. 

Depreciation of tugs. 

Replacement of boilers and special repairs 

of steamers. 

Replacement of boilers and special repairs 
of tugs. 


Fixed charges— 

Subsidy to Republic of Colombia... 

Redemption of subsidy bonds. 

Interest on subsidy bonds. 

Interest on first mortgage bonds.... 
Redemption of first mortgage bonds 


Total—Taxes, appropriations and fixed 
charges. 

Net income. 


$10,000.00 
20,550.00 
2,100.00 

41,361.59 

3,000. 00 

$10,000.00 
41,100.00 
2,100.00 

57, 000.00 

3,000. 00 




$20,550.00 


15,638.41 



77,011.59 

113,200.00 

. 

36,188.41 

25,000.00 
128,340. 00 
96,660.00 
80, 415. 00 
150,000.00 

25,000. 00 
121,080.00 
103,920. 00 
85,241.25 
150,000.00 



$7,260.00 

7, 260.00 
4,826. 25 



480,415.00 

485,241,25 


4,826.25 

557, 426.59 

598, 441. 25 


41,014.66 

295,231.77 

266, 746. 73 

28,485. 04 



Gross revenue receipts, expenditures and net earnings for 1899, compare, as under, 
with those of 1898: 



Earnings. 

Operating 

expenses. 

Earnings 
over operat¬ 
ing expenses. 

Taxes and 
appropria¬ 
tions for de¬ 
preciations, 
etc. 

Net earn¬ 
ings. 

1899. 

$2,195,041.96 
2,142,881.17 

$1,342, 383. 60 
1,277,693.19 

$852,658.36 
865,187. 98 

$77,011.59 
113,200.00 

$775,646.77 
751,987.98 

1898. 

Increase in 1899. 

52,160. 79 

64, 690.41 



23, 658. 79 

Decrease in 1899. 

12,529. 62 

36,188.41 

Decrease in fixed charges. 1899 ... 



4,826.25 

Increase in profit, 1899 . 

28,485.04 



EARNINGS. 

RAILROADS. 

The total net decrease of earnings of the railroad proper in 1899, as compared with 
1898, of $7,493.51, or 0.68 per cent, results principally from a decrease in number of 
passengers. 

The most important decrease was in cargo from points in Central America to 
Europe of 13,000 tons. There were large increases in business from and to New 
York, the most important being: to San Francisco 6,000 tons, to South Pacific ports 
1,500 tons, from San Francisco 7,300 tons, from South Pacific ports 15,000 tons. 

There was a decrease of 1.64 per cent in earnings on west-bound business, and an 
increase of 0.56 per cent on east-bound business. 

The following table shows the freight tonnage carried over the railroad in 1899 as 
compared with 1898: 


Years ending December 31. 

1899. 

1898. 

Increase 

percent. 

Decrease 

percent. 

Tons carried west bound «. 

146,496 
140,904 

144,182 
123,974 

1.60 

13.66 


Tons carried east bound a . 


Total, east and west bound «. 


287,400 

268,156 

7.18 





a Ton of 2,000 pounds, or 40 cubic feet. 














































































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


269 


The gross earnings per ton moved on the road compare as follows: 



Year 
ending 
Decem¬ 
ber 31, 
1899. 

Year 
ending 
Decem¬ 
ber 31, 
1898. 

Decrease. 

West bound. 

S3.59 
3.04 

S3.66 
3.33 

Per cent, 
1.91 
8. 71 

East bound. 

Average. 

3.32 

3.51 

5.41 



Table No. 4, attached to this report, shows the origin and destination of the freight 
carried over the railroad, and Table No. 9 gives the classification of freight from the 
Pacific coast destined to all ports. 

Compared with 1898, the total tonnage carried over the road in 1899 shows an 
increase of 19,244 tons, or 7.18 per cent, and the earnings an increase of $13,148.87, 
or 1.40 per cent. 

Of the total tonnage carried, 50.97 per cent was west bound and 49.03 per cent 
eastbound. In 1898 these proportions were 53.77 per cent and 46.23 per cent, 
respectively. 

Through freight amounted to 85.85 per cent of the total number of tons carried, 
against 84.16 per cent in 1898. 

In 1899 there was an increase of $1,577.80, or 3.51 per cent, on mails and a decrease 
of $2,573.33, or 17.19 per cent, on excess baggage. 

The following statements show the number of passengers carried and the passen¬ 
ger earnings: 


Classification. 

Number of passengers carried. 

Passenger earnings. 

1899. 

1898. 

Decrease. 

1S99. 

1898. 

Decrease. 

First class. 

4,230 
68,002 

4, 868 
112,936 

Per cent. 

13.11 
39. 79 

$23,713.35 
39,933.12 

$25,106. 90 
58,198.07 

Per cent. 
5.55 
31.38 

Second class. 

Total. 

72,232 

117,804 

38.68 

63,646.47 

83,304.97 

23.60 



Average receipt for passenger. 


Classification. 

1899. 

1898. 

Increase. 

Decrease. 

First-class passengers: 

Through . 

$8.85 
3.07 

4.70 
. 54 

$8.89 
2.91 

4.59 
.49 

Per cent. 

Per cent. 
0.45 

Local . 

5.50 

2.40 
10.20 

Second-class passengers: 

Through . 


Local . 





The number of first-class passengers carried shows a decrease of 638, or 13.11 per 
cent, and $1,393.55, or 5.55 per cent, in revenue. Second-class passengers show a 
decrease of 44,934 in number carried, or 39.79 per cent, and $18,264.95 in earnings, 
or 31.38 per cent. 

STEAMSHIP LINE. 

The earnings of the steamship line show an increase of $142,286.14, or 22.94 per 
cent, as compared with those of 1898, due mainly to the increase in traffic to and 
from San Francisco and South Pacific ports. 

All classes of earnings, except treasure, show an increase,'the most important being 
in freight earnings, of $115,400.10, or 24.11 per cent, and passenger earnings of 
$25,729.80, or 34.36 per cent. 


























































270 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


JOINT RAILROAD AND STEAMSHIP RECEIPTS. 

These receipts show a decrease of $82,631.84, or 19.85 per cent. 

Last year’s receipts included the accumulated earnings for three years of machine 
shops and from sales of coal and materials, which accounts for the apparent decrease 
this year of $38,064.29 in those receipts. 

The decrease in interest and exchange of $34,360.93 is due principally to the 
change in our accounting rate for conversion of Colombian silver into United States 
gold. ' 

Although telegraph receipts decreased $7,322.80, as compared with those of 1898, 
in which year there was an increase of $7,803.40, due to war-message service, the 
receipts for 1899 of $3,633.85 are about the average of other years. 

The following table will show the number of tons lightered in Panama Bay during 
the years 1899 and 1898: 



1899. 

1898. 

Increase. 

Decrease. 

Merchandise. 

Tons. 
147,663 
863 
5,904 

Tons. 
142,536 
872 
1,963 

Per cent. 
3.60 

Per cent. 

Lumber. 

1.03 

Coal. ... . . 

200. 76 

Total. . 


154,430 

145,371 

6.23 





Expenditures. 

The revenue expenditures of 1899 and 1898 compare as under: 



1899. 

1898. 

Increase. 

Decrease. 

Railroad. 

$487, 741.19 
579,830.60 
274,811.81 
77,011.59 

$500,437. 42 
501,072. 98 
276,182.79 
113, 200. 00 


$12,696.23 

Steamship line. 

$78,757.62 

Joint railroad and steamship expenses. 

Taxes and appropriations. 

Total. 

1,370.98 
36,188.41 

1,419,395.19 

1,390,893.19 

28,502.00 



. 


This table shows there is an increase of $28,502 in total revenue expenditures 
against an increase of $52,160.79 in earnings. 

railroad. 

CONDUCTING TRANSPORTATION. 

This department shows an increase of $19,074.43, or 7.34 per cent, due to the 
advance of 45 cents, silver, per day in wages of freight handlers and to the increase 
of 19,244 tons in total transported. 

MAINTENANCE OF EQUIPMENT. 

These expenses show an increase of $1,350.35, or 1.93 per cent over 1898, due to 
extensive repairs to freight and passenger cars. 

MAINTENANCE OF WAY AND STRUCTURES. 

The extensive repairs and improvements begun in 1897 and continued in 1898 have 
been completed this year, and with a decrease in these accounts amounting to 
$34,174.66. 

STEAMSHIP LINE. 

There is an increase of expenditure in this department amounting to $78,757.62, 
or 15.72 per cent, which is accounted for by the cost of chartering additional steam¬ 
ers to carry increase of 34,925 tons, and other expenses incidental thereto. 




















































271 


INVESTIGATION OF PANAMA RAILWAY COMPANY 


JOINT RAILROAD AND STEAMSHIP EXPENSES. 

These expenses show a decrease of $1,370.98, or 0.50 per cent. There were decreases 
m general expenses of $3,241.27; losses on cargo, $3,316.43, and repairs to docks and 
wharves of $8,232.84, which were offset by increase in lighterage expenses of 
$13,479.76. * ° 

GENERAL REMARKS. 


During the period from 1894 to 1899, inclusive, the percentage of total expenses to 
gross earnings w'as as follows: 


1894 . 

1895 . 

1896 . 

1897 (including taxes and appropriations for depreciation, etc.) 

1898 (including taxes and appropriations for depreciation, etc.) 

1899 (including taxes and appropriations for depreciation, etc.) 


Per cent. 
.. 69.93 
. 61.63 
53.94 
.. 61.12 
.. 64.91 
.. 64.66 


This year has been remarkable for a progressive increase in the price of materials 
and supplies of every kind, and also in the w^ages of laborers on the Isthmus. 

The disturbed political conditions in the Republic of Colombia have resulted in 
reducing the number of natives available for service, rendering it necessary to 
import about 50 men from Fortune Island to help in handling cargo until the return 
of peace. 

During the summer yellow lever prevailed in South America, and w^as introduced 
into Panama by the soldiery and other arrivals. Yet it did not affect the citizens 
nor spread among the employees of the railroad company or those of the canal com¬ 
pany. Nevertheless the fear of infection did have a bad effect upon the passenger 
business of your road, which was also diminished by the lessened activity of the 
canal company. 

On February 1, 1899, it became necessary to raise the wages of common labor 45 
cents, silver, per day on the Isthmus, in addition to the increase made March 16,1898. 

_ Under these circumstances economies -which would otherwise have been expe¬ 
rienced do not appear; yet by an increase in the tonnage transported the cost per 
ton has been materially lessened. Although there was a decrease in the earnings of 
your railroad from tonnage delivered to the European lines of $69,000, the increased 
tonnage delivered to your own steamship line, amounting to 34,130 tons, resulted in 
a gain of $100,390. 

This gain has been secured at an excessive cost by a w T eekly service w'hieh com¬ 
pelled the chartering of foreign ships, no American bottoms having been obtainable, 
but the results demonstrate that it is important to the success of your property to 
increase the traffic by vessels of your own, capable of handling much more than the 
present tonnage of your steamship line. 

The important improvements carried out upon the track and roadbed of the rail¬ 
road during the past two years have placed it in a condition to be maintained for 
some years with a minimum of expenditure; the rolling stock, buildings, and floating 
equipment now require similar attention, but involving only a comparatively small 
sum, the shops and warehouses having been extensively repaired during this year. 

A machine for the destruction of weeds and grass in the track by sprinkling them 
w r ith a solution of arsenic and saltpeter has been put in use, with results wffiich 
promise an economy in the maintenance of way. 

The premises of the railroad company at Colon are now’ lighted by current sup¬ 
plied from the plant of the Colon Electric Illuminating Company to the railroad 
eompany’s wires, under a contract. 

New’ offices for the train dispatcher, road master, and land department have been 
erected adjacent to the general offices at Colon, removing them from the floor of the 
warehouse, wffiere the space was required for the storage of coffee and other cargo. 
A new passenger station has also been built at Colon. 

The cost of these improvements has been charged to “ Repairs and renewals.” 

The sums w’hich have been heretofore appropriated on account of the depreciation 
of the floating equipment appear unduly large to be continued, in view of the 
enhanced value of such property at present, and it w’ill be seen that a smaller charge 
has been determined upon as ample to accord with the actual condition of the steam¬ 
ships and tugs. 

Four of the lighters will be condemned this year; the others are being put in good 
condition. Tw’O locomotives have been dismantled this year, the boilers having been 
used for the machine shop. 








272 INVESTIGATION OF PANAMA RAILWAY COMPANY. 

Attention is invited to the charges paid to the Colombian Government. In addi¬ 
tion to the annual payment in cash of $260,000, this company has transported free 
several train loads of troops for the suppression of the rebellion, and 9,511 persons on 
passes issued by the Government. Besides, according to the contract with the Gov¬ 
ernment, we have transported 24,500 tons of Colombian produce at half the regular 
rates, one-half of the charges being refunded in drawbacks. 

The officers and employees of the company are entitled to the thanks of the board 
for their devotion to the company’s interests. 

Respectfully, Charles Paine, General Manager. 


Table A .—Balance sheet , December 31 , 1899. 


RESOURCES. 


Cost of road, real estate, and equipment. 

New terminal at La Boca... 

La Boca branch, electric-light plant, office buildings, etc. 

Floating equipment: 

Steamers Allianca, Finance , and Advance , reduced value, 

December 31, 1898. 8287,969.27 

Depreciation fund. 20,550.00 

- $267,419.2/ 

Tugs and lighters, reduced value, December 31, 1898. 443,679.53 

Depreciation fund for tugs. 2,100.00 ■ 

-441,5/9.53 


$9, 774, 951. 74 
1,386,315. 91 
92,367. 78 


708,998.80 


Total 


11,962,634.23 


ius in ticasui). 

247 6 per cent Panama Railroad Company sinking fund subsidy bonds. 247,000.00 
939 4i per cent twenty-year gold sinking fund bonds. 939,980.00 


On deposit with financial agents for redemption of bonds: 

6 per cent subsidy bonds. 12,000.00 

4i per cent gold sinking fund bonds. 1,263.83 


Advance of subsidy to Republic of Colombia. 

Current assets: 

Cash in banks and with agents... 888,006.14 

Coal and supplies on hand.. 161,275.74 

Due from connecting companies. 95,740.49 

Due from United States Government. 16,421.60 

Due from companies and individuals. 144,080.81 

Accrued interest on deposits. 6,386.67 

Accrued interest on securities owned.. 2,738.75 

General average accounts. 14,671.99 

Unadjusted accounts. 58,100.95 


1,186,980.00 


13,263.83 
1, 482,000. 00 


1,387,423.14 


16,032,301.20 

LIABILITIES. 

Capital stock. $7,000,000.00 

4 i per cent, twentv-vear sinking fund gold bonds (authorized issue, 

$4,000,000): 

Issue to date (2,962 bonds, less 141 bonds previously redeemed).$2,821,000.00 

Less drawn for redemption in 1899. 140,000.00 

- 2,681,000.00 


Total capital stock and mortgage liabilities. 9,681,000.00 

6 per cent gold sinking fund subsidy bondsa. 1,482,000.00 

Due contractors, new terminal at La Boca b . 1 , 179 ,924.96 

Bonds drawn for redemption not presented for payment: 

4i per cent, twenty-year gold bond. 1,072.50 

6 per cent subsidy bonds. 13,000.00 

- 14,072.50 

Accrued interest on bonds: 

4£ per cent, twenty-year gold bonds (1,763 bonds). 19,833.75 

6 per cent subsidy bonds. 14,820.00 

~— 341, 6o3.70 


a 1,482 6 per cent gold sinking fund subsidy bonds of $1,000 each, amounting to $1,482,000, issued 
November 1, 1880, fall due November 1, 1910. ' 

To meet this bonded indebtedness, $225,000 annually of the Colombian Government subsidy was 
pledged till March 27, 1908, the same to be applied by the company, first, to the payment of the inter¬ 
est, and second, as a cumulative sinking fund for the redemption of the principal; the bonds to be 
drawn yearly in September to an amount equal to the then surplus of the subsidy sinking fund, the 
drawn bonds to be paid on November 1 after each drawing, and thereby redeeming the whole issue 
in 1908. 

b Of this amount $916,000 will become due in 1902, and is secured by an equivalent amount of the 
company’s new 4£ per cent bonds as collateral; $113,792.98 becomes due March 31, 1900, $22,824.90 on 
June 30, 1900, and $127,307.08 on December 31,1900. The total may be reduced in the meantime at the 
option of the company by payments on account. 


S. Deming, Treasurer. 















































INVESTIGATION OF PANAMA RAILWAY COMPANY. 273 


Funds for redemption of bonds: 

4£ per cent, twenty-year gold bonds. SC*’ 691 33 

6 per cent subsidy bonds." " gcjj 795 ' 00 

r>, t> j, „ . - $132,486.33 

Due Republic of Colombia: 

Department of Panama. 21 875 00 

Government of Colombia.". .. 1’ 1 ’ 666.67 

Fund for replacement of boilers and special repairs to tugs. 9 000 00 

Current liabilities: e . 

Isthmus drafts not presented... 21 963 38 

Coupons not presented. 3 ] 235 ! 00 

Audited vouchers. 57 428 50 

Unclaimed dividends.307]00 

Due deceased or missing employees.2,289.17 


Balance to credit of profit and loss 


85,223.05 
3,390,398.94 


Total 


16,032,301.20 


Table B.— Profit and loss account, December 31, 1899. 

DEBIT. 


To operating expenses. $ 1 , 342 ,383.60 

Taxes, and appropriations for depreciation and special repairs of steamers and tugs. ’ Ti\ Oil. 59 

Fixed charges.-. 480,415.00 

Cost of 2 locomotives, dismantled during the year, less value of parts fit for use. 10,182.10 

Adjustment of accounts of previous years. 5 ,975.39 

Uncollectible accounts written off.. 123.85 

Balance, assets over liabilities, December 31, 1899. 3,390,398.94 


Total. 5,306,490.47 


CEEDIT. 


By balance, December 31, 1898. 82,971,448.51 

Gross earnings. 2,195,041.96 

4£ per cent, twenty-year sinking fund gold bonds redeemed. 140,000.00 


Total. 5,306,.490.47 


Table No. 1. —Comparative statement of operating expenses of railroad for the years ending 

December 31, 1898 and 1899. 



1899. 

1898. 

General expenses on the Isthmus: 

Advertising . 

$15.60 
880. 34 
7,597.02 
2,930.00 
12,331.08 
13,286. 24 
1,615. 77 
3,434.09 

$14. 50 
596.31 
6,289. 09 
2,940.90 
11,403.18 
12,830. 50 
1,828.83 
5,133.18 

Cablegrams . 

Hospital service . 

Legal expenses . 

Salaries of officers . 

Salaries of clerks and attendants. 

Office expenses, stationery and printing . 

Other expenses . 

* Total . 

42,090.14 

41,036.49 

Conducting transportation: 

Advertising . 

1,262.40 
25.88 
22,391.26 
24,521. 30 
171.84 
96,536. 49 
1,504.86 
5,143. 05 
3,159. 90 
26,346.16 
61,842.04 
5,495.15 
2,531. 76 
15,341.04 
2,122.85 
6,968.99 
2,727.39 
868. 73 

1,423.00 
39.41 
22,537.36 
27,224.47 
78.46 
73,287. 87 
1,507.09 
5,128. 32 
4,201.87 
29,306.16 
60,623.44 
2,943.40 
2,643.23 
15,932. 34 
2, 014.12 
6,143.20 
3,992.98 
859. 94 

(Clearing wrecks... 

Engineers and firemen... 

Enel for locomotives ..... 

Injuries to persons. 

Labor Union and Panama, stations. 

Oil tallow waste and other supplies for locomotives. 

Roundhouse men ..... 

Sn perintendenee and clerks.. 

Switchmen yardmen and yard watchmen. 

Station agents and clerks ..... 

Station supplies and expenses ............. 

stationery and printing ...... 

Train conductors baggagemen flagmen, and hrakemen. 

Train supplies and expenses.. 

Telegraph expenses _ _ ....... 

Wafer supply for locomotives.... 

Other expenses ... 

Total. 

278,961.09 

259,886.66 





pan ry— 05-18 








































































274 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Table No. 1.—Comparative statement of operating expenses of railroad for the years ending 
December 31, 1898 and 1899— Continued. 



1899. 

1898. 

Maintenance of equipment: k 

$36,460.48 
10,442.96 

$32,961.68 


13,762.71 


7,208.29 
5,026.07 
11,938. 96 
192. 68 

5,715.98 


4,293.29 


13,023.42 

Stationery and printing... 

162.01 




Tnt.nl ... 

71,269. 44 

69,919.09 


Maintenance of way and structures: 

Repairs of bridgest and culverts . . . .. 

5,956.32 
4,250.96 

5,805.14 

Repairs and renewal of general offices. 

570.13 

Repairs of road machinery and tools. 

2,029. 76 
29,347.83 
535.52 

2,216.16 

Repairs of roadway and track. 

53,557.07 

1 ^ nf syntehps and frogs .... 

429.91 

Renewal of spikes and rail fastenings . 

4,837.95 
10, 579.05 
15,115.36 
13.87 

8,883.03 
4, 676. 30 
2,806.80 
a 55. 35 

Repairs and renewal of station buildings . 

Repairs of shop buildings, water and fuel stations . 

Repairs of section houses, tool houses, etc . 

Renewal of ties .. ....... 

6,099. 34 
1,753.86 
5, 648.89 

35,379.02 

Repairs of telegraph . 

1,159.92 
4,724.25 

Rpmnynl nf weeds hrnsh grass etc.. 

Superintendence and clerks ... 

8,901.36 
295. 07 

9,133. 63 

Stationery and printing .. 

209.03 

Other expenses ..... 

55.38 

100.14 


Total . 

95,420.52 

129,595.18 



a Credit. 


[Extracts from the fifty-first annual report of the Panama Railroad Company.] 

New York, March 28, 1901. 

To the stockholders of the Panama Railroad Company. 

Gentlemen: The year has been one of the most important in the history of the 
company. The report of the general manager, with the accompanying statement of 
earnings and expenses for the calendar year 1900, and the treasurer’s balance sheet 
and transcript of profit and loss account, will furnish you detailed information upon 
the physical and financial aspects of the company’s properties and affairs. 

The capital stock issue remains unchanged; the new 4J per cent first mortgage 
gold bond issue has been reduced by redemption in the sum of $139,000 par value of 
such bonds; and the 6 per cent subsidy bond issue has also been reduced by redemp¬ 
tion in the amount of $136,000 par value of such bonds. 

In my last report I advised you of the practical completion of the new port and 
terminals at La Boca; but naturally in a work of this magnitude (perhaps the largest 
of its character on the Pacific side of the continent) additional improvements and 
work, including the deepening of the channel and basins, became desirable in order 
to bring the port and terminals to their fullest utility. This has been accomplished; 
the port is now open to commerce, and ships for the first time in the history of the 
Panama route now load and discharge directly at the dock. 

At our request the United States Hydrographic Office has made a survey and chart 
of the harbor and port of La Boca, and very considerately has delayed publication of 
the Official Government Chart in order to include therein the results established by 
the company’s continued operations during the last year, and which results were 
in December last verified by the surveying party detailed from the United States 
steamer Bancroft. 

As an incident of this most important work, we have deemed it of importance that 
the Republic of Colombia should make formal declaration of its acceptance of the 
port and pier as being in full compliance with the terms of our concession in that 
regard. Throughout the year we have conducted negotiations with Colombia and 
have reached a satisfactory agreement by which the Government has made and pub¬ 
lished a legislative decree of acceptance and approval. All payments in this connec¬ 
tion have been made by the company, and the company is now relieved from the 
obligation henceforth to pay $10,000 per annum, which by the concession it was 
required to pay until the completion of these improvements. 

In due course the cost of the La Boca port and terminals will be capitalized into 













































INVESTIGATION OF PANAMA RAILWAY COMPANY. 275 

the new per cent first mortgage gold bonds, which were authorized to be issued 
tor this purpose under the existing mortgage. 

During the past year the long standing contract with the Pacific Mail Steamship 
Company, expired by limitation, and this company, for the first time in a genera¬ 
tion, regained its complete liberty of action. 

the great changes which had come about in the traffic world had convinced the 
directors that the time had arrived to inaugurate the “open-door policy’’ for the 
Panama route, and we therefore declined to confer upon any one steamship line 
exclusive privileges over the Panama route. We accordingly negotiated and recently 
have executed satisfactory traffic agreements with several important steamship lines 
on the Pacific, and also have renewed the long standing contracts with the seven 
Atlantic lines now serving the Panama route. The same privilege upon equal terms 
was offered by us to the Pacific Mail Steamship Company, but that company expressed 
its unwillingness to contract other than upon an exclusive basis. 

The inauguration of the policy above referred to, together with the growth of 
traffic, brings us to the consideration of additions to our steamship service, and we 
are seriously considering the construction of new ships for our Atlantic line. Upon 
the Pacific side we have met the requirements of our increasing traffic bv the charter 
of vessels of American registry. 

We fully appreciate that the adoption of this new policy involves additional 
expenditures and vigilant attention, and that the operations are somewhat of an 
experimental nature, but we expect good results ultimately to flow from this larger 
and more progressive policy. 

A full traffic agency at San Francisco has been established during the year. 

The possible extension of our Atlantic service to Atlantic ports other than New 
York is also under examination. 

We fully recognize the importance of developing traffic on the Atlantic seaboard, 
and especially to furnish the Gulf States an outlet for their products via the Isthmus 
route. 

The net earnings for the year represent 6| per cent upon the capital stock. 

I refer you to the accompanying reports for more detailed particulars. 

Respectfully submitted. 

J. Edward Simmons, President. 


Panama Railroad Company, 

New York , March 15, 1901. 

To the President of the Panama Railroad Company. 

Sir: I respectfully submit the following report of the business and operations of 
the Panama Railroad Company for the year ending December 31, 1900, and of the 
condition of the company’s property and finances at the close of the year. 

The operations of the year show the following results': 


Statement of earnings and expenditures. 


1900. 


1899. 


Increase. 


Decrease. 


earnings. 


Railroad: 

Colon to Panama— 

Freight. 

Treasure . 

Mails. 

Extra baggage. 
Passengers. 


Panama to Colon- 

Freight . 

Treasure . 

Mails. 

Extra baggage. 
Passengers. 


$505,898.92 
9,876.45 
45,653. 70 
8,546.59 
38,614.86 


$526,382.19 
6,668.44 
41,648.47 
6,827.62 
30,677.08 


$2,708.01 
4,005.23 
1,718.97 
7,937.78 


$20,483.27 


608,090.52 


612,203.80 


4, 


113.28 


599,178.19 
12,868.20 
5,116.47 
7,890.79 
37,852.07 


662,905.72 


1,270,996.24 


427,655.12 
15,702.09 
4,871.58 
5,564.88 
32,969.39 


486,763.06 


1,098,966.86 


171,523.07 


244.89 
2,325.91 
4,882.68 


176,142.66 


172,029.38 


833.89 


Total earnings of railroad 











































276 INVESTIGATION OF PANAMA RAILWAY COMPANY 


Statement of earnings and expenditures —Continued. 


earnings— continued. 

Railroad—Continued. 

Panama Railroad Steamship Line— 
Atlantic service— 

Freight. 

Treasure . 

Mails. 

Extra baggage. 

Passengers. 

Miscellaneous. 


Pacific service- 

Freight . 

Passengers.. 


Joint railroad and steamship receipts 

Total earnings. 

EXPENDITURES. 


1900. 

1899. 

Increase. 

Decrease. 

$769, 225. 62 
S, 044.02 
60,618. 30 
2, 047. 63 
128.234. 78 
7,814. 88 

1594,131. 92 
7,502. 21 
53,189. 72 
1,949. 85 
100,621.00 
5,075. 38 

$175,093.70 
541.81 
7,428. 58 
97. 78 
27, 613. 78 
2, 739. 50 


975,985. 23 

762,470.08 

213,515.15 


5,922.06 
155.00 


5,922.06 
155. 00 






6,077. 06 


6,077.06 




402,136.18 

333, 605. 02 

68, 531.16 


2, 655,194. 71 

2,195, 041. 96 

460,152. 75 



Operating expenses of railroad: 

General expenses on Isthmus. 

Conducting transportation. 

Maintenance of equipment. 

Maintenance of way and structures 


Panama Railroad Steamship Line: 
Atlantic service— 

Steamer expenses. 

Agency expenses... 

Charter of steamers. 


Pacific Service— 

Steamer expenses.. 
Agency expenses .. 
Charter of steamers 


40,216.25 
309,516. 83 
116,518. 87 
95, 810. 60 


42, 090.14 
278,961. 09 
71,269. 44 
95,420. 52 


30,555. 74 
45,249. 43 
390. 08 


51,873.00 


562,062.55 i 487,741.19 


74, 321. 36 


576, 391. 96 
116, 689. 67 
140, 634. 79 


421,952. 82 
110,362.40 
47, 515.38 


154,439.14 
6,327.27 
93,119. 41 


833,716. 42 


579,830. 60 


253,885.82 


3,801.11 
8. 92 
6, 650. 00 


3, 

6 , 


801.11 
8.92 
650.00 


Joint railroad and steamship expenses. . 

Total operating expenses. 

Earnings over operating expenses. 


Taxes, and appropriations,for depreciation and 
special repairs of steamers and tugs: 

Republic of Colombia for non extension of 

road. 

Depreciation of steamers. 

Depreciation of tugs. 

Replacement of boilers and special repairs 

of steamers. 

Replacement of boilers and special repairs 
of tugs. 


Fixed charges: 

Subsidy to Republic of Colombia.... 

Redemption of subsidy bonds. 

Interest on subsidy bonds. 

Interest on first mortgage bonds. 

Redemption of first mortgage bonds. 


Total taxes, appropriations, and fixed 
charges. 


Net income 


10,460.03 


321,164. 78 


1,727,403.78 


927, 790. 93 


2,100.00 


3,000.00 


5,100.00 


25,000. 00 
136,080. 00 
88,920. 00 
75, 926. 25 
150,000. 00 


475, 926. 25 


481,026.25 


446,764. 68 


274,811.81 


1,342,383. 60 


10,460. 03 


46, 352. 97 


385,020.18 


852, 658. 36 


75,132. 57 


10, 000. 00 
20,550. 00 
2,100. 00 

41,361. 59 

3, 000. 00 


77, Oil. 59 


25. 000. 00 
128, 340. 00 
96,660. 00 
80,415. 00 
150,000.00 


480, 415. 00 


557,426. 59 


295,231. 77 


7, 740. 00 


151,532.91 


10,000. 00 

20, 550. 00 


41, 361. 59 


71,911.59 


7,740.00 
4, 488. 75 


4,488.75 


76,400.34 























































































































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 277 

Gross revenue receipts, expenditures, and net earnings for 1900 compare, as under, 
with those of 1899: ^ ’ 



Earnings. 

Operating ex¬ 
penses. 

Earnings 
over operat¬ 
ing expenses. 

Taxes and 
appropria¬ 
tions for de¬ 
preciations, 
etc. 

Net earnings. 

1900. 

$2,655,194. 71 
2,195,041.96 

$1,727,403.78 
1,342,383.60 

$927,790.93 
852,658.36 

$5,100.00 
77,011.59 

$922, 690.93 
775,646. 77 

1899. 

Increase in 1900 ___ 

460,152.75 

385,020.18 

75,132.57 


147,044.16 

Decrease in 1900. 

71,911.59 

Decrease in fixed 
charges, 1900. 




4,488.75 

Increase in profit, 
1900. 









151,532.91 







Earnings. 


RAILROAD. 

The total net earnings of the railroad proper in 1900, as compared with 1899, show 
an increase of $172,029.38, or 15.65 per cent, resulting principally from increased 
freight traffic, east bound; there were also large increases in nearly all other kinds of 
traffic. 

The greatest increase in east-bound traffic was from South Pacific ports to New York, 
of 36,000 tons. Cargo from points in Central America to Europe increased 13,000 tons; 
from San Francisco to New York 11,000 tons. West-bound traffic to points in Cen¬ 
tral America and Mexico increased 4,700 tons, while traffic to San Francisco decreased 
3,000 tons. 

There was a decrease of 0.67 per cent in earnings on west-bound business, and an 
increase of 36.19 per cent on east-bound business. 

The following table shows the freight tonnage carried over the railroad in 1900 as 
compared with 1899: 


[Ton of 2,000 pounds, or 40 cubic feet.] 



Year end¬ 
ing De¬ 
cember 
31, 1900. 

Year end¬ 
ing De¬ 
cember 
31, 1899. 

Increase. 

Westbound... 

153,758 
203,619 | 

146,496 
140,904 

Per cent. 
4.96 
44.51 

East bound. 

Total. 

357,377 

287,400 I 24.35 

1 



The gross earnings per ton moved on the road compare as follows: 



Year end¬ 
ing De¬ 
cember 
31, 1900. 

Year end¬ 
ing De¬ 
cember 
31, 1899. 

Decrease. 

Westbound.. 

$3.29 

2.94 

$3.59 
3.04 

Per cent. 
8.36 
3.29 

East bound . 

Average east and west bound .. 

3.09 

3.32 

6.93 



Table No. 4, attached to this report, shows the origin and destination of the freight 
carried over the railroad. 

Compared with 1899, the total tonnage carried over the road in 1900 shows an 
increase of 69,977 tons, or 24.35 per cent, and the earnings an increase of $151,039.80, 
or 15.83 per cent. 















































278 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Of the total tonnage carried, 43.02 per cent was west bound and 56.98 per cent 
east bound. In 1899 these proportions were 50.97 per cent and 49.03 per cent 
respectively. 

The proportion of through traffic to the total tonnage was 87.11 per cent; in 1899 
through freight amounted to 85.85 per cent. 

Earnings from transportation of mails amounted to $50,770.17, an increase of 
$4,250.12, or 9.13 percent, over 1899; receipts from excess baggage increased $4,044.88, 
or 32.64 per cent. 

The following statements show the number of passengers carried and the passenger 
earnings: 


Classification. 

Number of passengers carried. 

Passenger earnings. 

1900. 

1899. 

Increase. 

1900. 

1899. 

Increase. 

First class. 

5,590 
77,642 

4,230 

68,002 

Per cent. 
32.15 
14.18 

$31,375.56 
45,091.37 

$33,713.35 
39,933.12 

Per cent. 
32.31 
12.92 

Second class. 

Total. 

83,232 

72,232 

15.23 

76,466.93 

63, 646.47 

20.14 



Average receipt per passenger. 


Classification. 

1900. ^ 

1899. 

Increase. 

Decrease. 

First class: 

Through. 

$8.97 
3.44 

1.92 

.51 

$8.85 

3.07 

4.70 

.54 

Per cent. 
1.36 
12.05 

Per cent. 

Local . 


Second class: 

Through. 

59.15 
5.56 

Local . 





First-class passengers increased 1,360, or 32.15 per cent, in number, and $7,662.21, 
or 32.31 per cent, in earnings. Second-class passengers increased 9,640 in number, 
or 14.18 per cent, and $5,158.25, or 12.92 per cent, in earnings. The marked decrease 
in the average receipt per passenger for second-class through passengers was due to 
the low rate obtained on laborers proceeding from Jamaica to Guayaquil. 

STEAMSHIP LINES. 

The Atlantic line also shows the effect of the increased freight traffic, mentioned 
elsewhere, from South Pacific ports and San Francisco to New York, the earnings 
amounting to $769,225.62 in 1900, an increase of $175,093.70, or 29.47 per cent, as 
compared with those of 1899. 

Of the total tonnage transported, 119,568 tons were carried by the company’s 
steamers and 72,031 tons by chartered steamers. 

Passenger earnings were greater in 1900 by $27,613.78, or 27.44 per cent, than in 
the previous year, and mail earnings increased $7,428.58, or $13.95 per cent. 

The total earnings of the Atlantic line from all sources was $975,985.23, an increase 
of $213,515.15, or 28 per cent. 

The steamship St. Paul, the first chartered ship of our Pacific line, sailed from 
San Francisco December 18 and arrived at La Boca wharf January 1, 1901. 

JOINT RAILROAD AND STEAMSHIP RECEIPTS. 

The total net result of earnings under this heading increased $68,531.16, or 20.54 
per cent. 

The following table will show the number of tons lightered in Panama Bay during 
the years 1900 and 1899: 



1900. 

1899. 

Increase. 

Decrease. 

Merchandise. 

Tons. 

188,936 

255 

5,682 

Tons. 

147,663 

863 

5,904 

Per cent. 
27.95 

Per cent. 

Lumber. 

70.45 
3.76 

Coal. 





194,873 

154,430 

26.19 






















































INVESTIGATION OF PANAMA RAILWAY COMPANY. 279 


Expenditures. 


The revenue expenditures of 1900 and 1899 compare as under: 



1900. 

1899. 

Increase. 

Decrease. 

Railroad. 

$562,062.55 

833,716.42 
10,460.03 
321,164.78 
5,100.00 

$487,741.19 

579,830.60 

$74,321.36 

253,885.82 
10,460.03 
46,352.97 


Steamship line: 

Atlantic service. 

Pacific service. 

Joint railroad and steamship expenses. 

Taxes and appropriations. 

Total. 

274,811.81 

77,011.59 

$71,911.59 

1,732,503.78 

1,419,395.19 

313,108.59 





This table shows an increase of $313,108.59 in total revenue expenditures, while 
there was an increase of $460,152.75 in total earnings. 


RAILROAD. 

CONDUCTING TRANSPORTATION. 

The expenses of this department, compared with 1899, show an increase of $30,555.74, 
or 10.95 per cent. The tonnage moved increased 69,977 tons, or 24.35 per cent. 

MAINTENANCE OF EQUIPMENT. 

The cost of repairs and maintenance of the rolling stock and other equipment was 
$116,518.87 in 1900, an increase of 63.49 per cent as compared with the previous year. 

The machine shop at Colon has been furnished with a new cupola for the foundry, 
a new pipe-cutting machine, a new T planer and matcher for the car shop, and an exhaust 
fan for carrying the shavings from the carpenter shop to the boilers. 

The repairs effected in the shops comprise, besides ordinary running repairs, the 
complete renewal of 7 locomotives, including the supply of 2 new boilers. 

Two hundred and sixteen freight cars have received general repairs; 170 box cars 
have received new roofs. 

Twenty-four passenger cars received general repairs. 

A critical inventory shows that 7 box cars and 2 flat cars are missing from the series 
of numbers, although none have been destroyed during the past year. As no positive 
inventory has been taken before this during the term of the present superintendent, 
it is believed that they were destroyed at some earlier date. 

MAINTENANCE OF WAY AND STRUCTURES. 

The total expenditures charged to this deparment in 1900 were $95,810.60, an 
increase of only $390.08, or 0.04 per cent, although the following considerable repairs 
■were made: 

Bridge No. 15 has been replaced by a new iron bridge, at a cost of $9,320. 

The south abutment of bridge No. 49 w r as rebuilt. 

Six culverts were also rebuilt, and all iron bridges between Colon and Panama 
repainted. 

Twenty-six thousand nine hundred and seventy-five feet of drain tile have been laid 
in cuttings. * 

Angle plates have been placed in the track between Corozal and Panama, a distance 
of 2.8 miles, which completes the fishing of the rails upon the main line. 

A new track, adjacent to the wharf at La Boca, 1,100 feet long, has been laid down. 

The deviation of the main line between Culebra and Pedro Miguel has been com¬ 
pleted, and was put in use on March 3, 1901. 

The reservoir at Mount Hope has been deepened by raising the embankments 
around it, affording a considerable addition to the supply. 

The water from a spring on Mount Ancon has been conveyed to the tanks at La 
Boca, affording an increase of about 5,000 gallons per day. 

The capacity of the reservoir at Colon has been increased by raising the walls 3 
feet, giving increased storage of about 73,000 gallons. 

The whole cost of the apparatus for the “removal of weeds and grass” by sprin¬ 
kling with poisons has been charged to that account, showing an apparent increase; 
but the cost of the year’s work has really been $1,673 less than in the previous year. 

STEAMSHIP LINES. 

The expenses of operating steamers between New York and Colon were $833,716.42 
in 1900, an increase of $253,885.82, or 43.79 per cent, the increase in tonnage being 
37.24 per cent. 




























280 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


As will appear from the accounts the steamships owned by this company have 
received very extensive repairs inside and outside; the use of the electric current has 
been extended to their night signals with satisfactory results. 

JOINT RAILROAD AND STEAMSHIP EXPENSES. 

The net increase in the expenditures under this head was $46,352.97, or 16.87 per 
cent. 

Lighterage expenses increased $33,475.37, or 30.08 per cent. 

Seven launches have received general repairs; 2 launches have been condemned as 
beyond repair, and others will be condemned this year. 

The tug Ancon has been put in good repair to enable it temporarily to take the 
place of the Bolivar , which requires new boilers. 

The water boat Balboa was condemned, her machinery removed, and the remains 
sold for scrap. 


GENERAL REMARKS. 

During the period from 1894 to 1900, inclusive, the percentage of total expenses to 
gross earnings was as follows: 

Per cent. 


1894 . 69.93 

1895 . 61.63 

1896 . 53.94 

1897 (including taxes and appropriations for depreciation, etc.).61.12 

1898 (including taxes and appropriations for depreciation, etc.). 64. 91 

1899 (including taxes and appropriations for depreciation, etc.). 64. 66 

1900 (including taxes and appropriations for depreciation, etc.). 65. 25 


An important improvement has taken place by the removal of the clerical force 
from the pier to the general offices at No. 24 State street, thereby consolidating the 
traffic department, to the great advantage of the patrons of the steamship line. This 
change resulted in the discontinuance of the general agency and the appointment of 
a terminal superintendent. 

The falling off in freights delivered to European lines, which was noted in the 
annual report for 1899, was recovered this year, the earnings from freight to Europe 
having been slightly in excess of the receipts in 1898. 

The local business of the road has been unfavorably affected by political disturb¬ 
ances on the Isthmus during the entire year. 

The station at Monkey Hill has been named Mount Hope, to correspond with the 
name of the cemetery. 

It has been necessary to charter ships on the Atlantic for 42 trips between Colon 
and New York in order to carry the freight offering. This is an expensive method 
of doing business, but nevertheless has afforded some profit to the railroad as well 
as to the steamship line. 

The progressive increase in the price of materials referred to in the last annual 
report has continued through this year, appearing most conspicuously in the coal 
accounts. 

We were obliged by the scarcity of labor to import about 30 men from Fortune 
Island, making in all 80 persons from there in the company’s service. 

Although yellow fever continued among the troops at* Panama until late in the 
year, no citizens upon the Isthmus were affected, nor was there any case among our 
passengers. 

On October 15 this company assumed charge of the work at La Boca. 

There yet remains a small amount of rock to be excavated-in the basin of evolu¬ 
tion, but nothing to impede the use of the wharf, at which vessels of 3,000 tons 
burden, chartered by this company on the Pacific coast, are regularly discharged 
and loaded with great economy. 

During the year the purchase of the shed and leasehold of pier No. 57, North 
River, New York, was accomplished, insuring control of that pier by a direct lease 
to the Panama Railroad Company from the dock department until 1911. 

The officers and employees of the company have served its interests faithfully and 
energetically, deserving the thanks of the board for their efforts, to which are due 
the success of the year’s operations. 

Respectfully, Charles Paine, General Manager. 









281 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Table A .—Balance sheet, December 31 , 1900 . 


RESOURCES. 

Cost of road, real estate, and equipment... 

New terminal at La Boca.. 

La Boca branch, electric-light plant, office buildings',"etc".. 

Floating equipment: 

Steams Allian<;a, Finance , and Advance , reduced value December 31, 


Tugs and lighters, reduced value December 31, 1899.$441 579 53 

Deprecnition fund for tugs, and cost of water boat Balboa 
and 4 lighters broken up. 95 584 40 


$267,419.27 

345, 995.13 


$9, 774,951. 74 
1,660,629.07 
99, 204. 01 


613,414.40 


Total.;. 

Bonds in treasury: .*. 

!?, per cent Panama Railroad Company sinking fund subsidy bonds. 226,000.00 
902 4$ per cent twenty-year gold sinking fund bonds. 903,037.50 


On deposit with financial agents for redemption of bonds: 

6 per cent subsidy bonds. U 000 00 

44 per cent gold sinking fund bonds.. 7 648 45 


Current assets: . 

Cash in banks and with agents. 840 024 02 

Coal and supplies on hand... ”" 175* 250 56 

Due from connecting companies.7l’175181 

Due from United States Government.. . . " 20 41140 

Due from companies and individuals. ’"" 112 ’ 839 34 

Accrued interest on deposits. 8 , 423.10 

Accrued interest on securities owned. 2 507 50 

General average accounts.*. ’ ’ 910 ' 82 

Unadjusted accounts, including purchase of leasehold pier 57, North 

River, until 1911. 97 ( 948.90 

Prepaid insurance and charter of steamers. 20,’ 169.72 


12,148,199.22 

1,129,037.50 


18,648,45 
1, 346, 000.00 


1,349,661.17 


Total 


15,991,546.34 


LIABILITIES. 

Capital stock. $7,000,000.00 

4i per cent twenty-year sinking fund gold bonds (authorized issue, 

$4,000,000): 

Issued to date (2,962 bonds, less 281 bonds previously redeemed).$2,681,000.00 

Drawn for redemption in 1900 . 139 ,000.00 

--—-— 2,542,000.00 


. 9,542,000.00 

. 1,346,000.00 

. 911,568.95 

6 ,435. 00 

11,000.00 

- 17,435.00 

18,697. 50 
14, 820.00 

33,517.50 

63,713.45 
69,875.00 

- 133,588.45 

. 21,875.00 

. 12,000.00 

33,619. 00 
1,765.00 
67,750.48 
307.00 
2,288.27 

- 105, 729.75 

... 3,867,831.69 


15,991,546.34 


a 1,346 6 per cent gold sinking fund subsidy bonds of $1,000 each, amounting to $1,346,000, issued 
November 1, 1880, fall due November 1, 1910. 

b Of this amount $876,000 will become due in 1903 and is secured by an equivalent amount of the 
company’s new 44 per cent bond as collateral. The total may be reduced in the meantime at the 
option of the company by payments on account. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Government subsidy was 
pledged till March 27, 1908, the same to be applied by the company: First to the payment of the 
interest, and second, as a cumulative sinking fund for the redemption of the principal, the bonds to 
be drawn yearly in September to an amount equal to the then surplus of the subsidy sinking fund, 
the drawn" bonds to be paid on November 1, after each drawing, and thereby redeeming the whole 
issue of 1908. 


Total capital stock and mortgage liabilities. 

6 per cent gold sinking fund subsidy bonds a. 

Due contractors, new terminal at La Boca b . 

Bonds drawn for redemption not presented for payment: 

44 per cent twenty-year gold bond..". 

6 per cent subsidy bonds. 

Accrued interest on bonds: 

44 per cent twenty-year gold bonds (1,662 bonds). 

6 per cent subsidy bonds. 

Funds for redemption of bonds: 

44 per cent twenty-year gold bonds. 

6 per cent subsidy bonds. 7 . 

Due Republic of Colombia: 

Department of Panama. 

Fund for replacement of boilers and special repairs to tugs 
Current liabilities: 

Isthmus drafts not presented. 

Coupons not presented. 

Audited vouchers. 

Unclaimed dividends. 

Due deceased or missing employees. 

Balance to credit of profit and loss. 


S. Deming, Treasurer. 




























































282 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Table B. —Profit and loss account, December 31, 1900. 


DEBIT. 

To operating expenses. 

Appropriations for depreciation and special repairs of tugs. 

Fixed charges.. 

Cost of water boat Balboa and 4 lighters, dismantled during the year, less value of 

parts fit for use and scrap. 

Supplies of no value Written off.. 

Uncollectible accounts written off. 

Balance, assets over liabilities, December 31, 1900. 


*1,727,403.78 
5,100. 00 
475,9‘26.25 


92, 759. 77 
777.47 
16,570.76 
3,867,831.69 


6,186,369. 72 

CREDIT. 

By balance, December 31, 1899. $3,390,398.94 

Gross earnings. 2,655,194. /I 

4| per cent twenty-year sinking fund gold bonds, redeemed. 139,000.00 

Accounts of previous years settled. 1» 776.07 


6,186, 369. 72 


Table No. 1. —Comparative statement of operating expenses of railroad for the years 

ending December 31, 1899 and 1900. 


General expenses on the Isthmus: 

Advertising. 

Cablegrams. 

Hospital service. 

Legal expenses. 

Salaries of officers. 

Salaries of clerks and attendants. 

Office expenses, stationery, and printing 
Other expenses. 


1900. 


1899. 


$15.12 
174.45 
7,997. 57 
2,574. 93 
11,673.07 
12, 725. 58 
2,370.98 | 
2,684.55 


$15.60 
880.34 
7, 597.02 
2, 930. 00 
12,331. 08 
13, 286.24 
1,615. 77 
3,434. 09 


Total. 

Conducting transportation: 

Advertising... 

Clearing wrecks. 

Engineers and firemen. 

Fuel for locomotives. 

Injuries to persons. 

Labor—Colon and Panama stations. 

Oil, tallow, waste, and other supplies for locomotives ... 

Roundhouse men.. 

Superintendence and clerks. 

Switchmen, yardmen, and yard watchmen. 

Station agents and clerks..I. 

Station supplies and expenses. 

Stationery and printing. 

Train conductors, baggagemen, flagmen, and brakemen 

Train supplies and expenses. 

Telegraph expenses.*.. 

Water supply for locomotives. 

Other expenses... ; 

Total. 

Maintenance of equipment: 

Repairs of freight cars. 

Repairs of locomotives. 

Repairs of passenger cars. 

Repairs and renewals of shop machinery and tools. 

Superintendence and clerks. 

Stationery and printing. 

Total. 

Maintenance of way and structures: 

Repairs of bridges and culverts. 

Repairs and renewal of general offices. 

Repairs of road machinery and tools. 

Repairs of roadway and track. 

Renewals of switches and frogs_'. 

ReneAvals of spikes and rail fastenings. 

Repairs and renewal of station buildings. 

Repairs of shop buildings, water, and fuel stations. 

Repairs of section houses, tool houses, etc. 

Renewal of ties. 

Repairs of telegraph. 

Removal of weeds, brush, grass, etc. 

Superintendence and clerks.. 

Stationery and printing. 

Other expenses. 


40,216.25 


42,090.14 


1,256.72 
72.46 
23,446.97 
32,382.58 
5,512.70 
101,502. 33 
1,637.78 
6, 385.52 
3,872.24 
27,883.17 
60, 696.99 
12. 402. 50 
2,564.53 
14,371.82 
2,717.57 

8.228.96 
3,230.02 

1.351.97 


1,262. 40 
25.88 
22,391.26 
24,521. 30 
171.84 
96, 536.49 
1,504.86 
5,143. 05 
3,159. 90 
26,346.16 
61,842.04 
5,495.15 
2,531.76 
15,341.04 
2,122.85 
6,968. 99 
2,727. 39 
868. 73 


309,516.83 278,961.09 


51,307.00 
30, 986. 38 
7, 459.23 
15,648. 60 
10,882.82 
234. 84 


116,518.87 


36,460. 48 
10,442.96 
7, 208.29 
5,026.07 
11,938. 96 
192. 68 


71,269. 44 


23, 852. 66 
2,124. 76 
2,208. 68 
23, 607. 76 
987.41 
4,608. 06 
3,178.54 

5, 200. 99 
231.11 

13, 758. 36 
1,691.23 

6, 732.29 

7, 394.20 
204. 86 

29. 69 


95,810. 60 


5, 956. 32 
4, 250.96 
2,029. 76 
29,347.83 
535.52 
4,837. 95 
10,579.05 
15,115. 36 
13.87 
6,099. 34 
1,753. 86 
5,648.89 
8,901.36 
295.07 
55.38 


95,420.52 


Total 





























































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 283 

Table No. 2.—Comparative statement of expenses of steamship line—Atlantic service—for 

years ending December 31, 1899 and 1900. 


1900. 


Steamer expenses: 
Port charges .. 


„ , 1900. 

Custom-house, entrance, clearance and con¬ 


sular fees, etc.$12,753.83 

Pilotage. 6,620.89 

Quarantine. 979.00 

Docking. 


Equipment, deck, engine, and commissary departments. 

Fuel. 

Feeding passengers and crew. 

Insurance. 

Labor on cargo. 

Labor on coal. 

Labor on ashes. 

Loss and damage. 

Oil and waste. 

Painting ship’s bottom. 

Repairs, deck, engine, and commissary departments. 

Stores, deck, engine, commissary, and'surgeon’s departments 

Stationery and printing... 

Telegrams and cables. 

Towage. 

Wages. 

Water. 

Washing. 

Other expenses. 


1899. 

$11,396.67 
5,864.52 
560.00 


Total 


Agency expenses: 

Advertising. 

Insurance. 

Labor. 

Office expenses... 

Repairs and rent of offices and wharves 

Salaries of agents and clerks. 

Stationery and printing. 

Taxes. 

Other expenses. 

Totals. 


$20, g53.72 


3.426.29 
10,889.11 
89,512.67 
55,279.69 
22,728.10 

121,072.38 
12,196.91 
1,291.00 
3,184. 06 
1,523.80 
2,815.04 
84,431.85 
12,752.55 
430.46 
1,463.54 

1.535.30 
116,968.22 

11,453.53 

1.227.37 

1.856.37 


576,391.96 


2,885.15 
1,307.86 
17,374.27 
7,126.75 
55,315.73 
29, 546.51 
1,486.61 
960. 00 
686. 79 


116, 689.67 


1899. 


$17,821.19 


1,571.18 
8, 502.35 
65,614.80 
42,069.04 
22,760.05 
92,068. 54 
11,624.25 
902.10 

1.425.10 
973.80 

1,736.88 
32,620. 90 
10,862. 29 
1.238.03 

1.604.10 
1,383.00 

94,6.58.55 
10,253.93 
924.57 
1,338.17 


421,952.82 


1,895. 70 
739.75 
15,134.56 
5,280. 97 
53, 781.77 
30, 931.65 
1,0.58.81 
960.00 
579.19 


110, 362.40 


Table No. 3. —Comparative statement of general expenses, New York, for the years ending 

December 31, 1899 and 1900. 



1900. 

1899. 

General expenses, New York: 

Advertising. 

$1, 659.64 
9, 765.18 
8,246.30 
73, 784.66 

$1,483. 46 
8,254. 79 
9,522.25 
71,140.27 

General office expenses. 

Legal services and expenses. 

Salaries of general officers and clerks and directors’ and committees’ 
fees. 

Stationery and pointing. 

1,381.20 
2,199.83 
3,141.81 

1,314.05 

1,430.81 

1,477.25 

Telegrams and cablegrams. 

Other expenses. 


Total. 

100,178.62 

94, 622.88 



[Extracts from the fifty-second annual report of the Panama Railroad Company.] 


New York, March 27, 1902. 

To the stockholders of the Panama Railroad Company: 

The past year was one of marked activity in the company’s affairs. The report of 
the general manager, with the accompanying statement of earnings and expenses for 
the calendar year 1901, and the treasurer’s balance sheet and transcript of profit and 
loss account, 'will furnish you detailed information upon the physical and financial 
aspects of the company’s properties and business. 

The capital stock issue of $7,000,000 is unchanged. 





































































284 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


The present outstanding bond issues are— 


Sinking fund 6 per cent subsidy bonds: 

Original issue of.-. 

(Being payment in advance until 1910 of the annual subsidy of 
$225,000 to the Republic of Colombia.) 

Redeemed by annual sinking-fund drawings, including $144,000 
drawn in 1901. 


$3, 000, 000 

1, 798, 000 


Outstanding at this date. 

Of those outstanding $206,000 are owned by the company and held 
in its treasury. 


1, 202, 000 
206,000 


Leaving in the hands of the public. 996,000 

By the operation of the sinking-fund provision of this issue all of the bonds out¬ 
standing will be redeemed in 1908. 

First mortgage 4£ per cent twenty-year gold bonds: 

Authorized issue of. $4, 000, 000 

Issued to the public.. $2, 504, 000 

Redeemed by annual sinking-fund drawings, including 

$141,000 drawn in 1901. 561, 000 

Held in the company’s treasury. 935, 000 

- 4, 000, 000 

Through the operation of the sinking fund this indebtedness will be reduced by 
1917, the date of maturity of the mortgage, to $1,199,000 and constitute the only 
mortgage lien upon the company’s property. 

Since the declaration of the previous dividend in January, 1893, in addition to the 
payment of $250,000 annually to the Colombian Government and the redemption of 
$561,000 of the company’s 4? per cent first-mortgage bonds out of gross earnings, the 
net earnings of the company amounted to $2,072,359.42, or 29? per cent upon the 
capital stock. 

Of this sum your directors have applied to the development and permanent 
improvement of the company’s property, in excess of the amount of the 2 per cent 
dividend paid in March last, $1,755,509.01, in the purchase and betterment of its 
steamships and floating equipment, the construction of the La Boca pier, port, and 
terminal, the acquisition and restoration of dredging outfit, the installation of elec¬ 
tric-light and ice plants, etc., and in general so improving the company’s property 
that it is to-day in better physical condition than at any time in its history. 

The port and terminal at La Boca having been completed and opened to commerce 
on January 1, 1901, its construction account was closed, showing a total cost of 
$2,148,303.69, and that outlay capitalized into the company’s 4J per cent first-mort¬ 
gage twenty-year gold bonds authorized for that purpose. 

As contemplated by contracts between the companies, a lease has been effected, 
from the canal company, of the La Boca Branch Railroad and adjoining lands nec¬ 
essary for the operation of the terminal during the life of the railroad company’s 
concession, or until 1966, upon mutually satisfactory terms. The use of dredges, 
clapets, and materials necessary for the operation of the La Boca Terminal, belong¬ 
ing to the canal company, have also been secured under lease upon reasonable terms. 

Owing to the severance of relations with the Pacific Mail Steamship Company the 
company put on a line of chartered vessels between Panama and San Francisco 
direct to maintain its coastwise traffic. Charters at the outset were difficult to 
obtain and very expensive, but later better conditions prevailed. The volume of 
coastwise traffic was materially increased during the year, but the very large outlay 
required to charter ships on both oceans to transport it was burdensome, and repre¬ 
sented interest on a capital sum which, had it been applied by the company to the 
construction of new vessels, would have made the business highly remunerative. 

The company’s business was adversely affected by political disturbances on the 
Isthmus of so grave a character as to have occasioned the landing there by the 
United States Government, under its treaty obligations, of its armed forces to main¬ 
tain free transit and to protect this company’s property. To the discreet and ener¬ 
getic performance of this delicate duty by the naval officers to whom it was intrusted, 
in concert with the Colombian authorities, is to be attributed the fact that the com¬ 
pany’s property was not materially impaired. These facts, together with a pro¬ 
longed labor strike in San Francisco and a materially reduced coffee output in Central 
America and Mexico during the season of 1900-1901, considerably affected net earn¬ 
ings, but these are extraordinary conditions not generally encountered. 
















INVESTIGATION OF PANAMA RAILWAY COMPANY. 


285 


During the year an important deviation of the railroad at Culebra, necessitated by 
canal construction, was completed and put in operation, but its entire cost was borne 
and paid by the canal company. 

. The condition of the company’s property has been fully maintained and many 
improvements added, for the interesting particulars of which I refer you to the gen¬ 
eral manager’s report. 

There is now under consideration a further increase of the facilities of the La Boca 
pier, in order to more expeditiously handle the increasing tonnage. 

The result of the company’s operations during the last year, under what was 
referred to as the “open-door” policy, has not been as remunerative as desired, and 
the board of directors are considering changes in existing traffic arrangements and 
connections at Panama. 

I refer you to the accompanying reports for more detailed particulars. 

Respectfully submitted. 

J. Edward Simmons, President. 


Panama Railroad Company, 

New York, March 18, 1902. 

To the president of the Panama Railroad Company. 

Sir: I respectfully submit the following report of the business and operations of 
the Panama Railroad Company for the year ending December 31, 1901, and of the 
condition of the company’s property and finances at the close of the year. 

The operation's of the year show the following results: 


Statement of earnings and expenditures. 


1901. 


1900. 


Increase. 


Decrease. 


EARNINGS. 


Railroad: 

Colon to Panama- 


Freight . 

Treasure . 

Mails. 

Extra baggage 
Passengers.... 


Panama to Colon— 


$606,185.65 
4,182. 77 
52,254.08 
9,695.40 
39,236.81 


$505,898.92 
9,376.45 
45,653.70 
8,546.59 
38,614.86 


$100,286.73 


6,600. 38 
1,148.81 
621.95 


$5,193.68 


711,554.71 


608,090.52 


103,464.19 


Freight. 

Treasure . 

Mails. 

Extra baggage 
Passengers.... 


Total earnings of railroad.... 

Panama Railroad Steamship Line— 
Atlantic service— 


1 , 


590,624.07 
14,334.07 
4,780.47 
7, 460. 37 
36,417.87 


599,178.19 
12,868.20 
5,116.47 
7,890.79 
37,852.07 


1,465.87 


8,554.12 


336.00 
430. 42 
1,434.20 


653,616.85 


662,905.72 


9,288.87 


365,171.56 


1,270,996.24 


94,175.32 


Freight. 

Treasure. 

Mails. 

Extra baggage 

Passengers 

Miscellaneous 


Pacific service- 


718, 607.88 
4,951.65 
79,015.83 
2,186.69 
154,571.58 
7,517.21 


966,850.84 


769,225.62 
8,044.02 
60,618.30 
2,047. 63 
128,234.78 
7,814.88 


975,985.23 


18,397.53 
139.06 
26,336.80 


50,617.74 
3,092.37 


297.67 


9,134.39 


Freight. 

Passengers.... 
Extra baggage 


349,277.33 5,922.06 

16,425.25 155.00 

120.18 .. 


343,355.27 
16,270.25 
120.18 


365,822.76 
498,863.81 
3,196,708.97 


6,077.06 
402,136.18 
2,655,194. 71 


359,745.70 
96,727.63 
541,514.26 


Joint railroad and steamship receipts 
Total earnings. 















































































286 


INVESTIGATION OF PANAMA RAILWAY COMPANY" 


Statement of earnings and expenditures —Continued. 


1901. 


EXPENDITURES. 


Operating expenses of railroad: 

General expenses on Isthmus. 

Conducting transportation. 

Maintenance of equipment. 

Maintenance of way and structures 


Panama Railroad Steamship Line: 
Atlantic service— 

Steamer expenses. 

Agency expenses. 

Charter of steamers. 


Pacific service- 

Steamer expenses.. 
Agency expenses a. 
Charter of steamers 


Joint railroad and steamship expenses. 

Total operating expenses.. 

Earnings over operating expenses. 

Appropriations for depreciation and special 
repairs of tugs: 

Depreciation of tugs. 

Replacement of boilers and special repairs 
of tugs... 


Fixed charges: 

Subsidy to Republic of Colombia. 

Redemption of subsidy bonds. 

Interest on subsidy bonds. 

Interest on first-mortgage bonds. 

Redemption of first-mortgage bonds. 

Interest on balance due La Boca wharf 
contractors. 


Total, appropriations and fixed charges.. 
Net income. 


$40,378. 20 
373, 022.88 
116,519.83 
95,341. 62 


625,262.53 


585, 877.45 
117.202.81 
164,929.38 


868,009. 64 


216,580. 21 
111, 798. 89 
279,659. 33 


608,038.43 


333,896. 64 


2, 435,207.24 1, 


761,501. 73 


2,100.00 
3,000. 00 
5,100. 00 

25,000.00 
144,240.00 
80, 760. 00 
70,200.00 
150; 000. 00 

26, 611. 61 

496,811.61 

501, 911. 61 

259,590.12 


1900. 


$40,216. 25 
309,516. 83 
116,518.87 
95,810. 60 


Increase. 


562,062. 55 


576,391.96 
116,689. 67 
140, 634. 79 


833, 716.42 


3,801.11 
8.92 
6,650. 00 


10, 460.03 


321,164.78 


727, 403. 78 


927, 790. 93 


2,100.00 

3, 000.00 


5,100.00 


25,000. 00 
136,080. 00 
88, 920. 00 
75, 926. 25 
150,000. 00 


$161. 95 
63, 506. 05 
.96 


63,199. 98 


9, 485. 49 
513.14 
24,294.59 


Decrease. 


$468.98 


34,293. 22 


212, 779.10 
111,789.97 
273, 009. 33 


597, 578.40 


12, 731.86 


707,-803.46 


475,926.25 


481. 026.25 


446, 764. 68 


8,160.00 


26,611.61 


20,885.36 


20,885. 36 


166,289.20 


8,160. 00 
5,726.25 


187,174.56 


a Includes wharfage at La Boca. 


Gross revenue receipts, expenditures, and net earnings for 1901 compare, as under, 
with those of 1900: 



Earnings. 

Operating ex¬ 
penses. 

Earnings 
over operat¬ 
ing expenses. 

Appropria¬ 
tions for de¬ 
preciations, 
etc. 

Net 

earnings. 

1901. 

$3,196,708.97 
2, 655,194. 71 

$2,435,207.24 
1,727,403. 78 

$761,501.73 
927,790. 93 

$5,100.00 
5,100.00 

$756,401. 73 
922, 690. 93 

1900. 

Increase in 1901. 

541,514.26 

707,803. 46 




Decrease in 1901. 

166,289.20 


166,289.20 
20,885.36 

Increase in fixed charges, 1901. 




Decrease in profit. 1901. 









187,174.56 
































































































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 287 


Earnings. 


railroad. 

The total earnings of the railroad proper show an increase of $94,175.32, or 7.41 per 
cent, in 1901 as compared with the previous year, the principal increase being in 
freight traffic west bound. 

The largest increasein west-bound freight was on business to San Francisco, amount¬ 
ing to over 10,000 tons; freight to south Pacific ports increased 7,000 tons. East- 
bound freight shows a decrease of 14,000 tons although there was an increase of 
12,000 tons in San Francisco freight. 

There was an increase of 17.01 per cent in earnings on all west-bound traffic, and 
a decrease of 1.40 per cent on all east-bound traffic. 

The following table shows the freight tonnage carried over the railroad in 1901 as 
compared with 1900: 

[Ton of 2,000 pounds, or 40 cubic feet.] 



Year 
ending 
Decem¬ 
ber 31, 
1901. 

Year 
ending 
Decem¬ 
ber 31, 
1900. 

Increase. 

Decrease. 

West bound. 

Tovs. 
195,743 
189,841 

Tons. 
153,758 
203,619 

Per cent. 
27.31 

Per cent. 

East bound. 

6.77 

Total. 


385,584 

357,377 

7.89 





The gross earnings per ton moved on the road compare as follows: 


/ 

Year 
ending 
Decem¬ 
ber 31, 
1901. 

Year 
ending 
Decem¬ 
ber 31, 
1900. 

Increase. 

Decrease. 

West bound. 

$3.10 
3.11 

83.29 

2.94 

Per cent. 

Per cent. 
6.78 

East bound. 

5.78 

Average. 


3.10 

3.09 

.32 





Table No. 4, attached to this report, shows the origin and destination of the freight 
carried over the railroad. 

Compared with 1900, the total tonnage carried over the road in 1901 shows an 
increase of 28,207 tons, or 7.89 per cent, and the earnings an increase of $91,732.61, 
or 8.30 per cent. A comparison of 1900 with 1899 shows an increase in tonnage of 
24.35 per cent, and in earnings of 15.83 per cent. 

Of the total tonnage carried, 50.77 per cent was westbound and 49.23 percent 
east bound. In 1900 these percentages were 43.02 per cent and 56.98 per cent, 
respectively. 

The proportion of through traffic to the total tonnage handled was 81.70 per cent; 
in 1900 through freight amounted to 87.11 per cent. Of the through freight 55.12 
per cent was New York business. 

Earnings from mails amounted to $57,034.55, an increase of $6,264.38, or 12.34 per 
cent. 

The following statement shows the number of passengers carried and the passen¬ 
ger earnings: 


Classification. 

Number of passengers carried. 

Passenger earnings. 

1901. 

1900. 

Increase. 

Decrease. 

1901. 

1900. 

Increase. 

Decrease. 

First elsss 

4,587 

84,574 

6,590 
77,642 

Per cent. 

Per cent. 
17.94 

828,507.47 
47,147.21 

831,375.56 

45,091.37 

Per cent. 

Per cent. 

9.14 

fiponnrl plnaq 

8.93 

4.56 

OCvUIlU LlCliJO .. 

Total 



89,161 

83,232 

7.12 


75,654.68 

76,466.93 


1.06 































































288 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Average receipt per passenger. 


Classification. 

1901. 

1900. 

Increase. 

Decrease. 

First-class passengers: 

Thrmiph _. . 

$8.98 
3.73 

3.77 

.47 

$8.97 

3.44 

1.92 
. 51 

Per cent. 
0.11 
8.43 

96.35 

Per cent. 

T.nf*fll . . . 


Second-class passengers: 

ThrmipLi ... 


T.nofll _. . 

7. 84 




First-class passengers decreased 1,003, or 17.94 percent, in number and $2,868.09, 
or 9.14 per cent, in earnings. Second-class passengers increased 6,932 in number, or 
8.93 per cent, and $2,055.84, or 4.56 per cent, in earnings. The increase of 96.35 per 
cent in the average receipt per second-class through passenger was due to the falling 
off in the movement of laborers from the West Indies to Guayaquil, carried at a low 
contract rate. 


STEAMSHIP LINES. 

The total earnings of the Atlantic Line from all sources was $966,850.84, a decrease 
of $9,134.39, or 0.94 per cent. Freight traffic shows a loss of $50,617.74 in earnings, 
or 6.58 per cent, due to the large falling off in business from south Pacific ports. 
The decrease in freight receipts was nearly offset by an increase of $18,397.53, or 30.35 
per cent, in mail earnings, and an increase of $26,336.80, or 20.54 per cent, in pas¬ 
senger earnings. 

Of the total tonnage transported, 119,413 tons were carried by the company’s 
steamers and 62,772 tons by chartered steamers. 

The Pacific Line, inaugurated in December, 1900, was maintained during the year 
with the result as shown in the statement on page 8. 

JOINT RAILROAD AND STEAMSHIP RECEIPTS. 

. The net result of the earnings of all the accounts grouped under this heading 
increased $96,727.63 over 1900, or 24.05 per cent. 

The following table will show the number of tons lightered in Panama Bay and 
handled on La Boca wharf during the vear 1901 as compared with cargo lightered in 
1900: 



1901. 

1900. 

Increase. 

Decrease. 

Merchandise. 

Tons. 
216,144 
409 
22,286 

Tons. 
188,936 
255 
5,682 

Per cent. 
14.40 
60.39 
292.22 

Per cent. 

Lumber. 


Coal. 


Total. 


238,839 

194,873 

22.56 





Expenditures. 

The revenue expenditures of 1901 and 1900 compare as under: 



1901. 

1900. 

Increase. 

Railroad. 

$625,262.53 

868. 009. 64 
608,038. 43 
333, 896. 64 

5,100.00 

$562,062.55 

833,716.42 
10, 460.03 
321,164.78 

5,100. 00 

$63,199.98 

34,293.22 
597,578.40 
12,731.86 

Steamship line: 

Atlantic service. 

Pacific service. 

Joint railroad and steamship expenses. 

Appropriations for depreciation and special repairs to 
tugs. 

Total. 


2, 440, 307. 24 

1,732,503. 78 

707,803.46 



This table shotvs an increase of $707,803.46 in total revenue expenditures, while 
there was an increase of $541,514.26 in total earnings. 



























































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


289 


RAILROAD. 

CONDUCTING TRANSPORTATION. 

The expenses of this department show an increase of $63,506.05, or 20.52 per cent, 
as compared with 1900. The tonnage moved increased 28,207 tons, or 7.89 per cent. 

The accounts show a considerable increase in the cost of labor, of fuel, and of sup¬ 
plies, when compared with last year. There has been no increase in the late for 
labor, but owing to the troubles on the Isthmus labor was less efficient, and it was 
necessary to maintain a larger force of Fortune Islanders than before. Coal an<V 
other supplies have commanded higher prices everywhere. 

MAINTENANCE OF EQUIPMENT. 

The total charges to this department in 1901 were $116,519.83, as against $116,518.87 
in 1900, although more tonnage was handled than in the latter year. 

In addition to ordinary running repairs, three of the older locomotives, which had 
been laid by some years ago, have been completely repaired and restored to service. 
The repairs of cars have been extensive; 38 hat cars have been converted into coal 
cars by the addition of sides, and 102 coal cars have had their sides raised to increase 
their capacity; 4 flat cars were fitted with 20-ton trucks. 

The car shop has received new tools, as follows: 

A patent band-sawing machine, with a machine for filing it. 

An Acme bolt cutter. 

And a self-feeding ripsaw. 

MAINTENANCE OF WAY AND STRUCTURES. 

The track, bridges, and buildings have been maintained at a high standard, the 
expenditures being $95,341.62, a decrease of $468.98, or 0.49 per cent, as compared 
with 1900. 

There have been laid in main track 100 tons of new rails of 70 pounds per yard; 
the rails thus released have been used for the construction of much-needed sidings 
at Colon and Panama. 

The repairs of masonry have been continued, the abutments and aprons of 10 
bridges having had complete repairs, and 4 culverts were rebuilt. 

At Frijoles a battery of hydraulic rams has been installed, dispensing with the 
steam engine and pumper, effecting a saving of $500 or more per annum. 

A new 6-inch water main from the reservoir at Mount Hope to the railroad, 1,500 
feet in length, has been laid, nearly doubling the daily supply available at Colon. 

The car shed in rear of the old passenger station at Colon has been converted into 
a storage warehouse for freight. 


STEAMSHIP LINES. 

The operating expenses of the line between New York and Colon were $868,009.64, 
an increase of $34,293.22, or 4.11 per cent. 

On December 16, 1900, the company was compelled to assume the operating of a 
steamship line between Panama and San Francisco at an unfavorable time, owing to 
the scarcity of vessels and the extremely high cost of charters; this was later corh- 
plicated with a long-continued strike at San Francisco. During the latter part of the 
year, after the defeat of the strikers and a reduction in the cost of charters, the line 
became self-sustaining, as would appear in the accounts, if allowed the proportions 
previously allotted to that traffic. The importance of this line is indicated by the 
amount of tonnage carried, which was 85,541 tons, an increase of 21,362 tons over 
the same route during the previous year; the total amounted to 49.26 per cent of the 
tonnage of the Atlantic Steamship Line, and formed 22.18 per cent of the total car¬ 
ried across the Isthmus. 

JOINT RAILROAD AND STEAMSHIP EXPENSES. 

The combined expenditures under this head amounted to $333,896.64, an increase 
of $12,731.86, or 3.96 per cent. 

The steamship Bolivar has been completely overhauled, receiving new boilers, 
pumps, etc., from New York. 

Three steel launches, built at Chester, Pa., are now on the ways and nearly 
completed. 

pan ry —05-19 


290 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


GENERAL REMARKS. 


During the period from 1894 to 1901, inclusive, the percentage of total expenses 
to gross earnings was as follows: 

Per cent. 


1894 ... 69.93 

1895 . .'. 61.63 

1896 ..... 53.94 

1897 (including taxes and appropriations for depreciation, etc.). 61.12 

1898 (including taxes and appropriations for depreciation, etc.). 64. 91 

1899 (including taxes and appropriations for depreciation, etc.). 64. 66 

1900 (including taxes and appropriations for depreciation, etc.). 65. 25 

1Qm /(including taxes and appropriations for depreciation, etc.). 64. 72 

\(or including Pacific Line not operated in 1900). 76. 34 


It is gratifying to find that the volume of traffic has been more than maintained, 
showing an increase over last year of 28,207 tons, in spite of the embarrassments 
under which all operations were conducted, by reason of the political disturbances 
which occasionally interrupted traffic, caused alarm among laborers, added to the 
cost of insurance of freight, and deterred timid passengers from taking the Isthmus 
route, for fear of delay or injury. 

The improvement in the condition of the company’s plant upon the Isthmus, which 
was begun several years ago, has been continued during the year 1901. 

It became necessary to supply an electric-light plant at Colon, to supplement the 
deficient supply afforded by the Colon Illuminating Company, which was put into 
use very successfully at the beginning of the year; in connection with this is an ice 
machine, made necessary by the frequent failures of the supply heretofore received 
from Panama, which promises to be self-supporting. 

The improved condition of the track seemed to warrant an increase in the loads 
carried in the freight cars; therefore the maximum load has been increased from 10 
to 12 tons. This was equivalent to the addition of 184 cars in the capacity of the 
rolling stock, and has been of much benefit to the service. 

The steamships owned by the company have been maintained in complete repair; 
it is believed that none of its property has depreciated. 

The shipways, for the repairs and construction of the floating equipment at Panama, 
having completely decayed, they were renewed at La Boca under a shed available 
there, in connection with a convenient shop and tools, leased from the new Panama 
Canal Company; and the tools and shop force formerly at Panama have been consol¬ 
idated with those at La Boca. At this establishment a large amount of work has 
been done. 

The dredges, clapets, etc., leased from the Canal Company, for the maintenance of 
deep water at La Boca, have been very extensively repaired; the general overhaul¬ 
ing of the steamer Bolivar has been completed; the three new launches, mentioned 
elsewhere, are now being set up. In addition, the repairs of the transports on the 
piers and repairs of foreign steamships were made at the new La Boca shops. 

In Colon the ship berths at Pier No. 1 required dredging, to accommodate deeper 
laden coal ships. To effect this the plant was increased by the purchase of a new 
“Hayward orange-peel bucket,” which will also be useful in the future. 

Important improvements have been undertaken and partly completed upon Pier 
No. 2 at Colon, whereby an additional berth for the convenient handling of coal 
ships has been gained, and the long-distance trucking heretofore necessary there will 
be avoided, three tracks connecting with the main line having been laid down the 
whole length of the wharf. 

An annex for the reception of any case of contagious disease has been added to the 
hospital at Colon. 

The officers and employees have been devoted to the interests of the company. 
Upon the Isthmus they have had to encounter the dangers incident to a state of war, 
and have exhibited courage as well as good judgment in their dealings with the con¬ 
tending factions. 

Respectfully, Charles Paine, General Manager. 











291 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Table A .—Balance sheet, December 31, 1901. 

Cost of road, real estate, and equipment. v i 

New terminal at La Boca... .f. $11,941,186.66 


RESOURCES. 

Floating equipment: 

Steamers Allian</a, Finance, and Advance, reduced value December 

31, 1900. 

Tugs and lighters, reduced value December 31, i 960 .$345,995*13 

Depreciation fund for tugs. 2 ,100 .00 


$267,419.27 


343,895.13 


611,314.40 


Total.. 

Bonds in treasury: 

206 6 per cent Panama Railroad Company sinking fund subsidy bonds. 206,000.00 

897 41 per cent twenty-year gold sinking fund bonds. 898,037.50 


On deposit with financial agents for redemption of bonds: 

6 per cent subsidy bonds. 

Advance of subsidy to Republic of Colombia :. 

Improvement and construction accounts. 

Current assets: 


Cash in banks and with agents. 434,420.22 

Coal and supplies on hand. 158,548.55 

Due from connecting companies. 112,229.01 

Due from United States Government. 26,671.87 

Due from companies and individuals. 116,716.36 

Accrued interest on deposits. 4 ,771.04 

Accrued interest on securities owned. 2 ,307.50 

Unadjusted accounts, including purchase of leasehold Pier 57, N. R., 

until 1911 . 67,829.42 

Prepaid insurance and charter of steamers. 20,864.28 


12,552,501.06 


1,104,037.50 

31,000.00 
1 , 202 , 000.00 
129,598.14 


944,358.25 
15,963,494.95 


LIABILITIES. 


Capital stock. $ 7 ,000,000.00 

4| per cent, twenty-year sinking fund gold bonds (authorized issue, 

$4,000,000): 

Issued to date (2.962 bonds, less 420 bonds previously redeemed). $2,542,000.00 

Drawn for redemption in 1901.*. 141,000.00 

- 2,401,000.00 


Total capital stock and mortgage liabilities. 9,401,000.00 

Six per cent gold sinking fund subsidy bonds «.. 1 ,202,000.00 

• Due contractors, new terminal at La Boca 5. 929,812.15 

Bonds drawn for redemption not presented for payment: 

6 per cent subsidy bonds. 32,000.00 

Accrued interest on bonds: 

4| per cent twenty-year gold bonds (1,526 bonds). 17,167.50 

6 per cent subsidy bonds. 12 , 020.00 


Funds for redemption of bonds: 

4| per cent twenty-year gold bonds. 62,248.11 

6 per cent subsidy bonds. 72,915.00 

- 135,163.11 

Due Republic of Colombia: 

Department of Panama. 21,875.00 

Fund for replacement of boilers and special repairs to tugs. 15,000.00 

Current liabilities: 

Isthmus drafts not presented. 26,987.43 

Coupons not presented. 5,642.50 

Audited vouchers. 52,157.99 

Unclaimed dividends. 111.00 

Due deceased or missing employees. 2,213.27 

-87,112.19 

Balance to credit of profit and loss. 4,110,345.00 


Total 


15,963,494.95 


b Of this amount $871,000 will become due in 1905, and is secured by an equivalent amount of the 
company’s new 4| per cent bonds as collateral. The total may be reduced in the meantime at the 
option of the company by payments on account. 

a 1,202 6 per cent gold sinking fund subsidy bonds of $ 1,000 each, amounting to $ 1 , 202 , 000 , issued 
November 1, 1880, fall due November 1,1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Government subsidy was 
pledged till March 27, 1908, the same to be applied by the company: First to the payment of the 
interest, and second, as a cumulative sinking fund for the redemption of the principal; the bonds 
to be drawn yearly in September to an amount equal to the then surplus of the subsidy sinking fund, 
the drawn bonds to be paid on November 1 after each drawing, and thereby redeeming the whole 
issue in 1908. 

S. Deming, Treasurer. 





















































292 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Table I>. —Profit and loss account , December 31, 1901. 


Debit 

To one hundred and thirteenth dividend.. SI40,000. ()0 

Operating expenses. 2,435,207.24 

Appropriations for depreciation and special repairs of tugs. 5,100.00 

Fixed charges. 496,811.61 

Supplies of no value written off. 775.45 

Uncollectible accounts written off. 18,438.78 

Balance, assets over liabilities, December 31, 1901. 4,110, 345.00 


7,206, 678.08 

Credi t 

By balance, December 31, 1900. 3,867,831.69 

Gross earnings. 3,196,708.97 

41 per cent twenty-year sinking fund gold bonds, redeemed. 141,000.00 

Accounts of previous years settled. 1,137.42 


Total....,. 7,206,678.08 


Table No. 1. —Comparative statement of operating expenses of railroad for the years 

ending December 31, 1900 and 1901. 


1901. 1900. 


General expenses on the Isthmus: 

Advertising. 

Cablegrams. 

Hospital service. 

Legal expenses. 

Salaries of officers. 

Salaries of clerks and attendants. 

Office expenses, stationery and printing 
Other expenses.,. 

Total. 


«8.21 

$15.12 

415. 33 

174.45 

7,576. 73 

7,997.57 

2,485. 74 

2,574. 93 

11.442. 40 

11,673. 07 

12,516.09 

12,725. 58 

2,408.12 

2,370. 98 

3,525.58 

2,684. 55 

40, 378. 20 

40,216.25 


Conducting transportation: 

Advertising. 

Clearing wrecks. 

Engineers and firemen. 

Fuel for locomotives. 

Injuries to persons... 

Labor, Colon and Panama stations... 

Oil, tallow, waste, and other supplies for locomotives... 

Roundhouse men. 

Superintendence and clerks.. 

Switchmen, yardmen, and yard w r atchmen. 

Station agents and clerks. .*.. 

Station supplies and expenses. 

Stationery and printing. 

Train conductors, baggagemen, flagmen, and brakemen 

Train supplies and expenses. 

Telegraph expenses. 

Water supply for locomotives. 

Other expenses. 

Total. 

Maintenance of equipment: 

Repairs of freight cars_'. 

Repairs of locomotives. 

Repairs of passenger cars .. 

Repairs and renewals of shop machinery and tools. 

Superintendence and clerks..’. 

Stationery and printing. 

Total... 

Maintenance of way and structures: 

Repairs of bridges and culverts. 

Repairs and renewal of general offices. 

Repairs of road machinery and tools. 

Repairs of roadway and track. 

Renewals of switches and frogs. 

Renewals of spikes and rail fastenings. 

Repairs and renewal of station buildings. 

Repairs of shop buildings, water and fuel stations. 

Repair of section houses, tool houses, etc. 

Renewal of ties. 

Repairs of telegraph. 

Removal of weeds, brush, grass, etc. 

Superintendence and clerks. 

Stationery and printing. 

Other expenses. 


1,288.04 

1,256.72 

138. 00 

72. 46 

29,176.58 

23,446. 97 

44,345.99 

32, 382. 58 

749. 08 

5,512. 70 

126.354.26 

101,502. 33 

2,779.02 

1,637.78 

8,211.39 

6,385.52 

4, 352.13 

3,872. 24 

33,257. 21 

27, 883.17. 

65, 695.42 

60,696. 99 

17,146. 25 

12,402. 50 

3, 706.24 

2,564.53 

18,295. 34 

14, 371.82 

3, 310.25 

2, 717. 57 

8, 726. 72 

8,228.96 

3,529.13 

3,230. 02 

1,961.83 

1,351.97 

373,022. 88 

309,516.83 

60, 266.15 

51,307.00 

24,216.16 

30,968.38 

9,496. 36 

7,459.23 

10,097.15 

15, 648. 60 

12, 230. 32 

10,882. 82 

213.69 

234.84 

116,519.83 

116,518.87 

12,493.24 

23,852. 66 

1,300. 36 

2,124.76 

2,317.79 

2,208. 68 

19,920. 74 

23, 607.76 

1,140.31 

987.41 

3,078. 69 

4,608.06 

22,139. 03 

3,178.54 

14,028. 64 

5,200. 99 

656. 22 

231.11 

2,971.13 

13, 758.36 

2,423.26 

1,691.23 

3, 934.01 

6,732.29 

8, 307. 27 

7. 394.20 

261.13 

204.86 

369.80 

29.69 


95,341.62 


95,810.60 


Total 






























































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 293 


Table No. 2 . —Comparative statement of expenses of steamship line—Atlantic service—-for 

years ending December 31, WOO and 1901. 



1901. 

1900. 

Steamer expenses: 

Port charges. 

«23 569 11 

■fton 79 

1901. 1900. 

Custom-house entrance, clearance and con¬ 
sular fees, etc. $15,279.23 $12, 753.83 

Pilotage. 7,351.88 6,620.89 

Quarantine. 938.00 979.00 

Docking. 

1,163. 68 
10,628.16 
111,450.11 
62,894.06 

3,426.29 
10,889.11 
89,512.67 
55,279.69 

Equipment, deck, engine, and commissary departments. 

Fuel. 

Feeding passengers and crew. 

Insurance. 

22, 760.53 
121,278.24 
14, 336. 98 
1,435.00 
6,038.14 
2,167.42 
1, 403.00 
44, 708.34 
12,462. 84 
875. 98 

22,' 728.10 
121 072 38 

Labor on cargo. 

Labor on coal. 

12,196.91 
1,291.00 
3 184.06 

Labor on ashes. 

Loss and damage. 

Oil and waste. 

1,523.80 
2,815. 04 
84,431.85 
12, 752.55 
430.46 

Painting ships’ bottom. 

Repairs, deck, engine, and commissary departments. 

Stores, deck, engine, commissary, and surgeon’s departments. 

• Stationery and printing.'..‘. 

Telegrams and cables ~. 

1,205.78 
1,484.80 
130,331.36 
12,578. 43 
1, 772.11 

1,463.54 
1.535.30 
116,968.22 
11,453.53 
1,227.37 
1,856. 37 

Towage. 

Wages. 

Water. 

Washing. 

Other expenses. 

1,333. 38 


Total. . . 

585,877. 45 

576,391.96 


Agency expenses: 

Advertising. 

2,669. 30 
1,759.21 

2, 885.15 
1, 307.86 
17,374.27 
7 126 75 

Insurance.. 

Labor. 

16,645.71 

Office expenses. 

5,962. 49 
57,388.51 

Repairs and rent of offices and wharves. 

551315. 73 

Salaries of agents and clerks. 

29,298.42 
1,443.80 

29,546.51 
1,486.61 
960. 00 

Stationery and printing. 

Taxes ....7. 

1,000.03 
1,035. 34 

Other expenses. 

686. 79 


Total. 

117,202.81 

116,689.67 



Table No. 3 —Comparative statement of general expenses, New York, for the years 

ending December 31, 1900 and 1901. 


• 

1901. 

1900. 

General expenses, New York: 

Advertising. 

$1,728.59 

$1,659.64 

General office expenses. 

6,615. 74 

9,765.18 

Legal services and expenses. 

9,149.82 

8,246. 30 

Salaries of general officers and clerks and directors’ and committees’ 
fees. 

70,271.60 

73,784. 66 

Stationery and printing. 

1,181.23 

1,381.20 

Telegrams and cablegrams. 

1,620.07 

2,199. 83 

Other expenses. 

1,074. 93 

3,141.81 

Total. 

91,641.98 

100,178. 62 


[Extract from the fifty-third annual report of the Panama Railroad Company.] 

New York, March 26, 1903. 

To the stockholders of the Panama Railroad Company. 

For the eighth time I respectfully present for your consideration the annual report 
of the board of directors. 

I call your attention to the report of the general manager, with the accompanying 
statement of earnings and expenses for the calendar year 1902, and the treasurer’s 
balance sheet and transcript of profit and loss account, which will furnish you 







































































294 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


detailed information upon the physical and financial aspects of the company’s pro¬ 
perties and business. 

Capital stock issue (unchanged).. $7, 000, 000. 00 

The present outstanding bond issues, are— 

Sinking-fund 6 per cent subsidy bonds: 

Original issue of (being payment in advance of the annual sub¬ 
sidy of $225,000 to the Republic of Colombia)_.$3, 000, 000. 00 

Redeemed by annual sinking-fund drawings, including $153, 000 

drawn in 1902. 1,951, 000. 00 


Outstanding at this date. 1,049,000.00 

Of those outstanding $180, 000 are owned by the company and 

held in its treasury.- 180,000. 00 


Leaving in the hands of the public....- 869, 000. 00 

By the operation of the sinking-fund provision of this issue, all of the bonds out¬ 
standing will be redeemed in 1908. 

First-mortgage 4J per cent 20-year gold bonds. 

Authorized issue of.. $4, 000,000. 00 

Held by the public. $2, 364, 000. 00 

Redeemed by annual sinking-fund drawings, in¬ 
cluding $140, 000 drawn in 1902. 701, 000. 00 

Held in the company’s treasury. 935, 000. 00 

- 4,000,000.00 

Through the operation of the sinking fund this indebtedness will be reduced by 
1917, the date of maturity of the mortgage, to $1,199, 000. It is the only mortgage 
lien upon the company’s property. 

During 1902, in addition to the payment out of the year’s gross earnings of the 
$250, 000, annually due the Colombian Government, and the redemption, with inter¬ 
est, of $140,000 of the company’s 4£ per cent first-mortgage bonds, $124,802.84 was 
expended out of accumulated earnings for carrying on new r construction and improve¬ 
ments to the company’s property ashore and afloat at the Isthmus, begun in 1901. 
That sum has been distributed partly to capital accounts and partly to operating 
expenses of the years 1902-1906, according to its character and as already authorized. 

Out of net earnings of the year 1901, a dividend of 2 per cent was declared and paid 
to the stockholders in June last, and a like dividend of 2 per cent was declared and 
paid in September last, out of the current net earnings of 1902. 

The port and terminal at La Boca, which was completed and opened to commerce 
on January 1, 1901, has fully justified the expectations of the management. The 
total cost of this great work was $2,161,552.39, all of which has been paid, so that 
the company has no outstanding indebtedness in this regard. 

The facilities of the pier at La Boca have been increased by the addition of four 
large electric transporters with auxiliary operating plant, as shown by the general 
manager’s report herewith; required depths in the basins adjoining the pier and in 
the maritime channel approach to it have been maintained at large cost, but results 
obtained in operating the terminal have fully warranted the outlay. 

The La Boca port and terminal, which connects by a branch road with the main 
line, is open to commerce, and ships of large capacity now load and discharge directly 
at this dock. In addition to the facilities of the La Boca port the business of the 
company has required the maintenance, also, of its terminal facilities in the city of 
Panama. 

The company’s operations on the Isthmus were seriously hampered by revolution¬ 
ary disturbances, which continued there during the year and caused the company 
large expense for the gratuitous transportation of Government troops and material 
under its concessionary contract with the United States of Colombia. Numerous 
new taxes and imposts which restricted traffic were levied by that Government that 
were later in part discontinued. 

The company’s relations with the Colombian Government officials, both national 
and State, continue friendly, all differences that arose during war operations having 
been satisfactorily adjusted. 

New contracts were entered into with the Pacific Mail Steamship Company to cover 
traffic on the Pacific coast north of Panama, and with the Pacific Steam Navigation 
Company and the Cia Sud Americana de Vapores to cover traffic on that coast south of 
Panama, w r hich resulted in the discontinuance in June, 1902, of this company’s 
steamship service on the Pacific between Panama and San Francisco, that had not 
proved as remunerative as desired; under the new contract with the Pacific Mail 















INVESTIGATION OF PANAMA RAILWAY COMPANY. 295 

Steamship Company weekly departures from Panama and San Francisco have been 
inaugurated. 

The company’s traffic connections on the Atlantic side with the Ham burg-Ameri- 
can Line, Compagnie Generate Transatlantique, Royal Mail Steam Packet Company, 
Ley land Line (West India and Pacific branch), Harrison Line and Compania Tras- 
atlantica de Ilarcelona, which connect the Isthmus with the leading ports of Europe, 
continue satisfactorily, as they have done without interruption for more than a quar¬ 
ter of a century. 

Ihe company’s steamship line from New York, which connects with the railroad 
at Colon, continues a remunerative branch of the service. 

The result of the company’s operations was materially affected by a constant advance 
in cost of fuel, materials, and labor. 

The condition of the company’s property has been fully maintained and many 
improvements added, for the interesting account of which I refer you to the general 
manager’s report. 

I again refer you to the other accompanying reports for more detailed particulars. 

Respect fully subm i tted. 

J. Edward Simmons, President. 


Panama Railroad Company, 

New York, March IS, 1903. 

To the President of the Panama, Railroad Company. 

Sir: I respectfully submit the following report of the business and operations of the 
Panama Railroad Company for the year ending December 31, 1902, and of the condi¬ 
tion of the company’s property. 

The operations of the year show the following results: 


Statement of earnings and expenditures. 


EARNINGS. 

Railroad: 

Colon to Panama- 

Freight . 

Treasure . 

Mails. 

Extra baggage. 

Passengers. 


Panama to Colon- 

Freight. 

Treasure . 

Mails. 

Extra baggage. 
Passengers..... 


Total earnings ol' railroad 


Panama railroad steamship line— 
Atlantic service— 

Freight. 

Treasure . 

Mails. 

Extra baggage. 

Passengers. 

Miscellaneous. 


Pacific service- 

Freight . 

Passengers. 

Extra baggage. 


1902. 

1901. 

Increase. 

Decrease. 

$559,392.30 
7,223.08 
19,402. 46 
8,816.26 
31,735.21 

$606,185. 65 
4,182. 77 
52,254.08 
9, 695.40 
39,236.81 


$46, 793.35 

$3,040.31 

2,851.62 
879.14 
7,501.60 




656,569. 31 

711,554.71 


54,985.40 


522,667.88 
16,035.16 
4,818.45 
7,142.35 
32,112.16 

590,624.07 
14,334.07 
4,780.47 
7,460.37 
36,417.87 


67,956.19 

1,701.09 
37. 98 


318.02 
4,305. 71 



582,776.00 

653,616.85 


70,840.85 


1,239,345.31 

1,365,171.56 

- 

125,826.25 

. 

652,966.87 
5,556.51 
83,013. 99 
1,945.07 
150,824.81 
4,008.88 

718,607.88 
4,951.65 
79,015.83 
2,186.69 
154,571.58 
7,517. 21 


65,641.01 

604.86 
3,998.16 


241.62 
3,746. 77 
3,508.33 




898,316.13 

96)6,850.84 


68,534.71 

— 

161,051.32 

6,029.00 
37.91 

349,277.33 
16,425.25 
120.18 

.. 

188,226.01 
10, 396.25 
82.27 




167,118.23 

365,822. 76 


198,704.53 


458,035.96 

498,863. 81 


40,827.85 


2, 762,815.63 

3,196, 708. 97 


433,893.34 

.! 


Joint railroad and steamship receipts 
Total earnings. 




























































































INVESTIGATION OF PANAMA RAILWAY COMPANY 


2m 


Statement of earnings and expenditures —Continued. 


EXPENDITURES. 


1902. 


1901. 


Operating expenses of railroad: 

General expenses on Isthmus. 

Conducting transportation. 

Maintenance of equipment. 

Maintenance of way and structures 


Panama Railroad Steamship Line: 
Atlantic service— 

Steamer expenses.. 

Agency expenses. 

Charter of steamers.. 


Pacific service— 

Steamer expenses.. 
Agency expensesa. 
Charter of steamers 


Joint railroad and steamship expenses. 

Total operating expenses. 

Earnings over operating expenses. 

Appropriations for depreciation and special re¬ 
pairs of tugs: 

Depreciation of tugs. 

Replacement of boilers and special repairs 
of tugs... 


Fixed charges: 

Subsidy to the Republic of Colombia. 

' Redemption of subsidy bonds. 

Interest on subsidy bonds. 

Interest on first mortgage bonds. 

Redemption of first mortgage bonds. 

Interest on balance due La Boca wharf 
contractors. 


Total appropriations and fixed charges... 
Net income. 


$42,838.36 
342,321.45 
118,080.25 
91,469.93 


594,709. 99 


552,276. 86 
117,137.92 
120,570.19 


789, 984. 97 


91,444.93 
54,019. 67 
106, 862.50 


252,327.10 


319,093. 71 


1,956,115.77 


806,699.86 


2,100.00 

3,900.00 


6,000. 00 


25,000.00 
152,880. 00 
72,120.00 
99,882.50 
150,000.00 

5,432.96 ; 

| 505,315.46 j 

. 511,315.16 ; 


$40,378.20 
373,022.88 
116,519.83 
95,341.62 


625,262.53 


585,877.45 
117,202.81 
164, 929. 38 


868,009. 64 


216,580. 21 
111,798.89 
279,659.33 


608,038.43 


333,896. 64 


2,435, 207. 24 


761,501.73 


2 , 100 . 00 

3,000. 00 


5,100.00 


25,000. 00 
144,240.00 
80, 760. 00 
70,200.00 
150,000. 00 

26,611.61 


496,811.61 


501, 911. 61 


295,384.40 259,590.12 


Increase. 


$2, 460.16 


1,560.42 


Decrease. 


$30,701.43 


3,871.69 


30,552.54 


33,600. 59 
64.89 
44,359.19 


78,024. 67 


125,135.28 
57, 779.22 
172,796. 83 


355,711. 33 


14,802.93 


479,091.47 


45,198.13 


900. 00 


900.00 


8,640.00 
29,682*56' 


8,640.00 

21,178.65 


8, 503. So 


9,403.85 


35,794.28 


«Includes wharfage at La Boca. 


'Gross revenue receipts, expenditures, and net earnings for 1902, compare, as 
under, with those of 1901: 



Earnings. 

Operating ex¬ 
penses. 

Earnings 
over operat¬ 
ing expenses. 

Appropria¬ 
tions for de¬ 
preciations, 
etc. 

Net earn¬ 
ings. 

1902. 

$2,762,815. 63 
3,196,708.97 

$1,956,115.77 
2,435,207.24 

$806,699.86 
761,501. 73 

$6,000.00 
5,100.00 

$800,699.86 
756,401.73 

1901. . 


Increase in 1902. 



45,198.13 

900.00 

44,298.13 

Decrease in 1902. 

433,893.34 

479,091.47 

Increase infixed charges, 1902. 



8,503.85 





Increase in profit, 1902 . 




35, 794.28 



1 






























































































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


297 


Earnings. 


railroad. 

The total earnings of the railroad proper, for 1902, show a decrease of $125,826.25, 
or 9.22 per cent, as compared with the earnings for 1901. There was a falling off in 
all kinds of traffic excepting treasure, which shows an increase of $4,741.40, or 25.61 
per cent. 

freight traffic, eastbound, decreased almost 18,000 tons from South Pacific ports, 
and over 11,000 tons from San Francisco, while the decrease in westbound freight to 
San Francisco was 11,000 tons, and to South Pacific ports 6,000 tons. 

Traffic to and from Panama, Central America, and Mexico increased slightly over 
last year. 

The following table shows the freight tonnage carried over the railroad in 1902, as 
compared with 1901: 

[Ton of 2,000 pounds, or 40 cubic feet.] 



Year 
ending 
Decem¬ 
ber 31, 
1902. 

Year 
ending 
Decem¬ 
ber 31, 
1901. 

; Increase. 

Decrease. 

Westbound. 

180,267 
166,422 

195,743 
189,841 

Per cent. 

Per cent. 

7.91 
12.34 

Eastbound. 


Total. 


346,689 

385,584 


10.09 




The gross earnings per ton moved on the road compare as follows: 



Y ear 
ending I 
Decem¬ 
ber 31, 
1902. 

Year¬ 
ending 
Decem¬ 
ber 31, 
1901. 

Increase. 

Decrease. 

Westbound. 

f3.ll 
3.14 

S3.10 
3.11 

Per cent. 
0.32 
.96 

Per cent. 

Eastbound. 


Average. 


3.13 

3.10 

.97 





Table No. 5, accompanying this report, shows the origin and destination of the 
freight carried over the railroad. 

Compared with 1901, the total tonnage transported over the railroad in 1902 shows 
a decrease of 38,895 tons, or 10.09 per cent, and the earnings a decrease of $114,749.54, 
or 9.59 per cent. 

Of the total tonnage carried, 52 per cent was westbound and 48 per cent eastbound. 
In 1901 these percentages were 50.77 per cent and 49.23 per cent, respectively. 

The proportion of through traffic to the total tonnage handled w'as 78.61 per cent; 
in 1901 through freight amounted to 81.70 per cent. 

Coal comprised 60.21 per cent of the local traffic westbound. 

The following statements show the number of passengers carried and the passenger 
earnings: 


Classification. 

Number of passengers 
carried. 

Passenger earnings. 

1902 

1901. 

Decrease. 

1902. 

1901. 

Decrease. 

First-class . 

3,862 
76,946 

4,587 
84,574 

Per cent. 
15.81 
9.02 

$25,631.78 
38,215.59 

$28,507.47 
47,147. 21 

Per cent. 
10.09 
18.94 

Second-class. 

Total . 

80,808 

89,161 

9.37 

63,847.37 

75,654.68 

15.61 



































































298 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Average receipts per passenger. 


, Classification. 

1902. 

1901. 

Increase. 

Decrease 

First-class: 



Per cent. 

Per cent. 

Through ... 

$8. 97 

$8. 98 


0.11 

Local . 

3.5.8 

3.73 


4. 02 

Second-class: 





ThronpTi . 

3. 90 

3.77 

5. 04 


Local . . . 

.42 

.47 


10. 64 







The total passenger earnings are $63,847.37, or 15.61 per cent less than in 1901. 
First-class passengers decreased 725, or 15.81 percent, in number and $2,875.69, or 
10.09 per cent, in earnings. Second-class passengers decreased 7,628, or 9.02 per cent, 
in number and $8,931.62. or 18.94 per cent, in earnings. 

STEAMSHIP LINES. 

The total earnings of the Atlantic Line from all sources amounted to $898,316.13, 
a decrease of $68,534.71, or 7.09 per cent, the loss being almost entirely due to the 
large falling off in tonnage to and from South Pacific ports and San Francisco. 

Of the total tonnage transported, 104,062 tons were carried by the Company’s 
steamers and 54,340 tons by chartered steamers. 

The Pacific Line was in operation only about six months, the last steamer sailing 
from San Francisco on June 12, and from Panama, July 5, which accounts for the 
large decrease in its earnings of $198,704.53, or 54.32 per cent. 

JOINT RAILROAD AND STEAMSHIP RECEIPTS. 

The net result of all the accounts grouped together under this heading shows a de¬ 
crease in earnings of $40,827.85, or 8.18 per cent. 

The following table will show the number of tons lightered in Panama Bay and 
handled on La Boca wharf during the year 1902 as compared with 1901: 



1902. 

1901. 

Decrease. 

Merchandise. 

Tons. 
209,086 
38 
20,980 

Tons. 
216,144 
409 

22,286 

Per cent. 
3.27 
90.71 
5.86 

Lumber. 

Coal.*. 


230,104 

238,839 

3.66 


Expenditures. 


The revenue expenditures of 1902 and 1901 compare as under: 



1902. 

1901. 

Increase. 

Decrease. 

Railroad. 

$594, 709. 99 

789,984.97 
252,327.10 
319,093. 71 

6,000.00 

$625,262.53 

868,009.64 
608,038.43 
333,896.64 

5,100.00 


$30,552.54 

78,024.67 
355, 711.33 
14,802.93 

Steamship line: 

Atlantic service. 


Pacific service. 


Joint railroad and steamship expenses. 

Appropriations for depreciation and special 
repairs to tugs. 

$900. 00 

Total. 


1,962,115. 77 

2, 440,307.24 


478,191.47 




This table shows a decrease of $478,191.47 in total revenue expenditures, while 
there was a decrease of $433,893.34 in total earnings. 







































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


299 


RAILROAD. 


CONDUCTING TRANSPORTATION. 


The expenses of this department show a decrease of $30,701. 43, or 8.23 per cent, 
as compared with 1901. The tonnage moved decreased 38,895 tons, or 10.09 per cent. 

An important expense was incurred by the free transportation of marines and 
sailors of the United States engaged in maintaining the security of the transit upon 
the Isthmus. 

From February 1 to December 31,1902, there were also transported without charge 
56,384 soldiers for the Colombian Government, and during the year 15,525 Govern¬ 
ment officials and employees on passes. 

MAINTENANCE OF EQUIPMENT. 

The total charge under this heading amounted to $118,080.25 during the year, an 
increase of $1,560.42, or 1.34 per cent, as compared with 1901. 

The running repairs upon the whole of the equipment have been promptly executed 
as required; in addition, 4 switch engines received thorough overhauling, engine No. 9 
having a new boiler. 

Four road engines which had been out of service for many years were repaired 
thoroughly and put into use. 

Eleven cars in the passenger service underwent general repairs. 

Forty-one box cars, 31 coal cars, and 65 flat cars received general repairs, and 19 
coal cars had the sides raised to increase their capacity. New cars were built to 
replace all the missing numbers referred to in the annuarreport for 1900. 

MAINTENANCE OF WAY AND STRUCTURES. 

The track bridges and buildings have been well maintained, the expenditures being 
$91,469.93, a decrease of $3,871.69, or 4.06 per cent. 

Two hundred tons of new steel rails of 70 pounds per yard have been laid in the 
main track; such of the rails removed as were suitable have been used to extend the 
sidings in Colon and Panama yards. 

Repairs of masonry include a new facing, upon a pile foundation, of the south 
abutment of bridge No. 48; an apron at bridge No. 42, of 4,000 square feet area; two 
pipe culverts replacing destroyed stone culverts, and many small improvements at 
other bridges. 

The track between Panama and Pedro Miguel, which is used as a highway for 
pack animals, has been strengthened by widening the roadbed with stone where it 
had been trampled away—over a distance of about seven miles. 

One thousand five hundred feet of drain tiles have been laid in cuttings. 

Important repairs to the docks at Colon were found necessary, and have been com¬ 
pleted in a substantial manner; the changes upon pier No. 2, begun last year, were 
finished. 

The beach road at Colon, in front of the company’s dwellings and shops, has been 
protected with stone. 

In order to facilitate the handling of large quantities of coal, the lagoon adjacent 
to the piers No. 1 and No. 2 at Colon has been filled, ready for use as coal-storage yard. 

The w^ater station at Pedro Miguel has been improved by the erection of a 20,000- 
gallon tank, with suitable arrangements for a rapid supply to the water cars, by 
which Panama and La Boca are furnished during the dry season. 

STEAMSHIP LINES. 

The operating expenses of the line between New York and Colon were $789,984.97, 
a decrease $78,024.67, or 8.99 per cent, as compared with the previous year. Owing 
to the large decrease in tonnage from San Francisco and South Pacific ports, only 
three extra cargo ships were required to handle the freight moving to New York, 
which accounts for the decrease of $44,359.19 in charter of steamers. In 1901 there 
were two round trips and seven trips. Colon to New York, of extra cargo ships. 

On October 24, 1902, the steamship Advance was laid off for repairs, her place 
being filled by a chartered vessel. 

Although the Pacific line was discontinued in July, the expenses of the San Fran¬ 
cisco agency have been continued as a charge to that line until the end of the year, 
while the charges to steamer expenses after July, as shown in Table No. 13, are princi¬ 
pally for loss and damage to freight. 


300 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


JOINT RAILROAD AND STEAMSHIP EXPENSES. 

The combined expenditures under this head, which include general expenses, 
foreign-agency expenses, lighterage, docks and wharves, real estate, etc., amounted 
to $319,093.71, a decrease of $14,802.93, or 4.43 per cent. 

Four of the oldest launches have been condemned; the three new ones purchased 
last year have been completed and are in use. 

GENERAL REMARKS. 


During the period from 1894 to 1902, inclusive, the percentage of total expenses to 
gross earnings was as follows: 

Per cent. 


1894 . 69.93 

1895 . 61.63 

1896 .:. 53.94 

1897 (including taxes and appropriations for depreciation, etc.). 61.12 

1898 (including taxes and appropriations for depreciation, etc.). 64. 91 

1899 (including taxes and appropriations for depreciation, etc.). 64. 66 

1900 (including taxes and appropriations for depreciation, etc.). 65. 25 

iqm /(including taxes and appropriations for depreciation, etc.). 64. 72 

/(or including Pacific line not operated in 1900). 76. 34 

190? /(deluding taxes and appropriations for depreciation, etc.). 65. 87 

\(or including Pacific line operated for six months). 71. 02 


At the request of the Government this company assumed the lighting of the city 
of Colon for the Colon Illuminating Company, receiving due compensation. The 
electric-light plant and the ice plant, which are operated together, have become self- 
sustaining and contribute much to the comfort and health of the company’s em¬ 
ployees. The general illumination has added to the security of the property. 

Dredging of the La Boca basin and in the maritime channel has been continuous; 
the use of the new wharf has been constant and without interruption, to the great 
benefit of the cargoes exchanged. 

Four electrical cranes and an electric plant for operating them are in course of 
erection, to supplement the steam cranes on the La Boca pier, at which the tonnage 
handled increased by 56 per cent over last year; practically superseding the use of 
lighters, except for coal and storage. 

The land department has continued to increase its revenue, notwithstanding the 
continuance of political disturbances and the temporary suspension of the adminis¬ 
tration of justice. 

Telephone instruments have been provided for the trains, enabling the conductors 
to have communication with the terminal officers at any point on the railway. 

The officers and employees have served the company faithfully. Upon the Isth¬ 
mus they have again had to deal with contending factions; by their courageous and 
judicious conduct they maintained the transit without serious interruption and con¬ 
tributed in no small measure to the reestablishment of peace. 

Respectfully, 


Charles Paine, General Manager. 


Table A .—Balance sheet , December 31, 1902. 

RESOURCES. 


Cost of road, real estate, and equipment. 

New terminal at La Boca. 

Floating equipment— 

Steamers Allianga, Finance, and Advance, reduced value December 

31, 1901. 

Tugs and lighters, reduced value December 31,1901.$343,895.13 

Cost of 3 new coal lighters. 36,342.40 


.| $11,986,452.88 

$267,419.27 


380,237.53 

Depreciation fund for tugs and cost of 4 lighters condemned 

and out of service. 62,100.00 

- 318,137.53 

- 585,556.80 

Total.1. 12,572,009.68 

Bonds in treasury: 

180 6 per cent Panama Railroad Company sinking-fund subsidy bonds. 180,000.00 
935 4i per cent twenty-year gold sinking-fund bonds.. 936,037.50 


1,116,037.50 


























INVESTIGATING OF PANAMA RAILWAY COMPANY. 


301 


On deposit with financial agents for redemption of bonds- 
6 per cent subsidy bonds. 

Advance of subsidy to Republic of Colombia.11 . 

Improvement and construction accounts.. . . . . . . . . . 

Fund for replacement of boilers and special repairs to tus:s 

Current assets: . 

Cash in banks and with agents. 

Coal and supplies on hand... 

Due from connecting companies... 

Due from United States Government.. 

Due from Republic of Colombia. .’ ” ‘ ‘ ”. 

Due from companies and individuals. 

Accrued interest on deposits. . . . . . . . . . . 

Accrued interest on securities owned........ ** * ’ ** ‘ * ‘ * ’ ’" ‘ ’'' ’ *' *' * 

Unadjusted accounts, including purchase of leasehold pier 57 N. R 

until 1911. 

Prepaid insurance and charter of steamers.. . ..... . .. .. . 


471,525.50 
187,682.74 
123,949. 27 
21,025.15 
21,367.21 
55,279.95 
6 , 677.06 
2,047.50 

79,515.71 
19,506.27 


32, 000.00 
1,049,000.00 
114,456.98 
22,544 .88 


988, 576.36 


15,894,625.40 

LIABILITIES. 


Capital stock. 

4J per cent twenty-year sinking fund goid bonds (authorized issue, $ 4 , 000 , 000 ): 

Issued to date (4,000 bonds, less 561 bonds previously redeemed). $3,439,000.00 

Drawn tor redemption in 1902. 140 ,000.00 


$7,000,000.00 


3,299,000.00 


Total capital stock and mortgage liabilities. 

6 per cent gold sinking fund subsidy bonds a. 

Bonds drawn for redemption not presented for payment: 

6 per cent subsidy bonds. 

Accrued interest on bonds: 

4£ per cent twenty-year gold bonds (2.386 bonds)_ 

6 per cent subsidy bonds.(.. 

Funds for redemption of bonds: 

per cent twenty-year gold bonds. 

6 per cent subsidy bonds. 


$26,842.50 
10,490.00 


63, 300. 85 
74,325.00 


Due Republic of Colombia: 

Department of Panama. 

Allowance to cover excess interest over contract rate on 4£ per cent bonds sold to prepay 
indebtedness due contractors new terminal at La Boca on October 15, 1905.. 


Current liabilities: 

Isthmus drafts not presented. $ 13 , 591 . n 

Coupons not presented. 7 ,247.50 

Audited vouchers. 53,632.21 

Unclaimed dividends. 117.00 

Due deceased or missing employees. 2,230.70 


Balance to credit of profit and loss 


10,299,000.00 
1,049,000.00 

32,000. 00 


37,332.50 


137,625.85 
21,875.00 


39,386. 44 


76,818.52 
4,201,587.09 


15,894,625.40 
S. Deming, Treasurer. 


Table B. —Profit and loss account , December 31, 1902. 

Debit. 


To one hundred and fourteenth dividend. $140,000.00 

One hundred and fifteenth dividend. 140,000.00 

Operating expenses. 1,956,115.77 

Appropriations for depreciation and special repairs of tugs. 6 ,000.00 

Fixed charges... 505,315.46, 

Cost of 4 lighters condemned and out of service. 60,000.00 

Adjustment of accounts of previous years. 5,599.48 

Uncollectible accounts, etc., written off... 120.17 

Balance, assets over liabilities, December 31,1902_1. 4,201,587.09 


Credit. 7,014,737.97 


By balance, December 31, 1901.. 4,110,345.00 

Gross earnings. 2,762,815.63 

4£ per cent twenty-year sinking fund gold bonds, redeemed. 140,000.00 

Accounts of previous years settled.— 1,577.34 


7,014,737. 97 


al,049 six per cent gold sinking-fund subsidy bonds of $1,000 each, amounting to $1,049,000, issued 
November 1, 1880, fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Government subsidy was 
pledged till March 27, 1908, the same to be applied by the company: First, to the payment of the 
interest, and second, as a cumulative sinking fund for the redemption of the principal, the bonds to 
be drawn yearly in September to an amount equal to the then surplus of the subsidy sinking fund, 
the drawn bonds to be paid on November 1 after each drawing, and thereby redeeming the whole 
issue in 1908. 




























































302 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Table No. 1 .—Comparative statement of operating expenses of railroad for the years ending 

December 81, 1901 and 1902. 



1902. 

1901. 

General expenses on the Isthmus: 

Advertising. 

Cablegrams. 

Hospital service. 

Legal expenses. 

Snlnrios of offipors . .... 

$7.58 
380.36 
8,505.95 
3,454.46 
11,094.88 
12,636. 90 
2,348.92 
4, 409.31 

$8.21 
415. 33 
7,576. 73 
2,485. 74 
11,442.40 
12,516.09 
2,408.12 
3,525. 58 

Salnripis nf r*lf*rks and attendants ... 

Offiae expenses stationery and printing. 

Other expenses . . 

Total. 

Conducting transportation: 

Advertising. 

Clearing wrecks. 

Engineers and firemen. 

Fuel for locomotives. 

42,838. 36 
— 

40, 378. 20 

1,269.98 
343.02 
29,784.11 

39, 709. 77 
461.82 

103,914.03 
2,195. 09 
7,562. 38 
4,330.15 

40, 922. 78 
61, 927. 39 
10, 577. 61 

3,235.90 
17, 848. 07 
3,536.08 
8,788.32 
3,658.18 
2 , 256.77 

1,288.04 
138.00 
29,176.58 
44, 345. 99 
749. 08 
126,354.26 
2,779.02 
8,211.39 

4.352.13 
33,257. 21 
65,695.42 
17,146.25 

3,706.24 
18,295. 34 
3, 310.25 
8,726.72 

3.529.13 
1, 961.83 

Injuries to persons. 

Labor—Colon and Panama stations.. . 

Oil, tallow waste and other supplies for loeomotives. 

Roundhouse men. . 

Superintendence and clerks. . 

Switchmen, vardmen. and vard watchmen. 

Station agents and clerks. 

Station supplies and expenses. 

Stationery and printing. 

Train conductors, baggagemen flagmen and brakemen. 

Train supplies and expenses. 

Telegraph expenses.. . . 

Water supply for locomotives. 

Other expenses. 

Total. . . 

342,321.45 

373.022.88 

Maintenance of equipment: 

Repairs of freight cars. 

45, 514.92 
39,490.18 
12,575.03 
8,741.48 
11,505.86 
252.78 

60.266.15 

24.216.16 
9,496.36 

10,097.15 
12,230.32 
213. 69 

Repairs of locomotives. . . 

Repairs of passenger cars. 

Repairs and renewals of shop machinery and tools. 

Superintendence and clerks... 

Stationery and printing. 

Total. 

118,080. 25 

116,519.83 

Maintenance of way and structures: 

Repairs of bridges and culverts. 

9,702. 97 
471.91 
2,205. 37 
35, 306.67 
57.02 
1,086.39 
9,432.14 
10,900. 49 
222.56 
5,931. 90 
2,964. 53 
3,667.69 
8,847.02 
253. 92 
419.35 

12,493. 24 

1, 300. 36 
2,317. 79 

19,920.74 
1,140.31 
3,078.69 
22,139.03 
14,028.64 
656.22 

2, 971.13 

2.423.26 
3,934.01 

8.307.27 
261.13 
369.80 

Repairs and renewal of general offices. 

Repairs of road machinery and tools. 

Repairs of roadway and track. 

Renewals of switches and frogs. 

Renewals of spikes and rail fastenings. 

Repairs and renewal of station buildings. 

Repairs of shop bttildings, water and fuel stations. 

Repairs of section houses, tool houses, etc. 

Renewal of ties.. 

Repairs of telegraph. 

Removal of weeds, brush, grass, etc. 

Superintendence and clerks .. 

Stationery and printing. 

Other expenses".“... 

Total. 

91, 469.93 

95,341.62 



[Extracts from the fifty-fourth annual report of the Panama Railroad Company.] 

New York, March 24, 1904 . 

To the stockholders of the Panama Railroad Company: 

I respectfully present for your consideration the annual report of the board of 
directors for the calendar year 1903. 

I call your attention to the report of the general manager, with the accompanying 
statement of earnings and expenses for the calendar year 1903, and the treasurer’s 
balance sheet and transcript of profit and loss account, w T hich will furnish you 
detailed information upon the physical and financial aspects of the company’s prop¬ 
erties and business. 

Capital stock issue (unchanged), $7,000,000. 
















































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


303 


The present outstanding bond issues are: 

Sinking fund 6 per cent subsidy bonds: 

Original issue of... $ 3 , 000 ,000 

(Being payment in advance of the annual subsidy of $225,000 to the 
Republic of Colombia.) 

Redeemed by annual sinking fund drawings, including $162,000 

drawn in 1903. 2,113, 000 


Outstanding at this date. 887, 000 

Of those outstanding $153,000 are owned bv the company and held in 

its treasury. 1 .'. 153,000 


Leaving in the hands of the public. 734, 000 

By the operation of the sinking fund provision of this issue all of the bonds out¬ 
standing will be redeemed in 1908. 

First mortgage 4| per cent twenty-year gold bonds: 

Authorized issue of.... $ 4 , 000, 000 

Held by the public.. $2, 224, 000 

Redeemed by annual sinking fund drawings, including 

$140,000 drawn in 1903.. 841, 000 

Held in the company’s treasury. 935,000 

- 4,000,000 


Through the operation of the sinking fund this indebtedness will be reduced by 
1917, the date of maturity of the mortgage, to $1,199,000. It. is the only mortgage 
lien upon the company’s property. 

During 1903, in addition to the payment out of the year’s gross earnings of the 
$250,000 annually due the Colombian Government, and the redemption, with inter¬ 
est, of $140,000 of the company’s 4i per cent first mortgage bonds, outlay has been 
limited to maintaining the company’s property in an effective condition, and com¬ 
pleting improvements begun in previous years. 

Construction account has been increased only by the cost of the four new electric 
transporters installed at La Boca, while operating expenses have been charged with 
the year’s (1903) proportion of betterments, completed in 1902. 

Dividends aggregating 8 per cent were declared out of accumulated earnings and 
paid 2 per cent on April 3, 2 per cent on October !, and 4 per cent on January 1 last. 

The company’s efforts for many years to recover a considerable sum of taxes 
improperly paid to the State of New York were successful this year, and a substantial 
amount was covered into the company’s treasury. 

The important outlay required each year to maintain depths in the basins along¬ 
side the La Boca pier may be regarded asa“ fixed charge” for the railroad until the 
Panama Canal is opened to cofumerce. The total cost for 1903 was less than for 
1902. 

The operation of the company’s steamship line has resulted favorably, despite the 
necessity for its maintenance chiefly with chartered ships, owing to the laying up 
for repairs of S. S. Advance and Finance , which are now in progress. 

The company’s connection, at Colon, with six important European steamship 
lines has been continued satisfactorily, and increased by a resumption of relations 
with Veloce Company of Genoa, Italy, and addition of the Austrian-American Line, 
thereby extending our service to ports on the Adriatic coast. 

Regular steamship connection has been established between Colon and New 
Orleans by arrangement with the United Fruit Company of Boston. 

Operations under the new contract with Pacific Mail Steamship Company to cover 
traffic on the Pacific coast north of Panama continues satisfactorily, although extreme 
quarantine regulations and destruction of terminal facilities at various Mexican and 
Central American ports were injurious; better results are expected this season. 

Reports are received from time to time regarding the expected early completion of 
projected transcontinental lines to compete with this company’s railroad, but no 
such competition is actively in operation yet. 

Operations under the new agreements .with Pacific Steam Navigation Company and 
Cia Sud Americana de Vapores were seriously hampered by the closing of several 
ports to commerce on the Pacific coast south of Panama, because of an outbreak of 
bubonic plague. 

An important decrease in exports from that territory resulted, with consequent loss 
of revenue to the joint carriers. Importation, however, was maintained, and on an 
increased scale. 














304 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


The average cost to the company of labor and supplies was higher than for previous 

Early in November, 1903, the Department of Panama seceded from the Republic 
of Colombia and successfully established the Republic of Panama, which new State 
has formally been recognized by nearly all of the leading nations of the globe. As a 
result the Republic of Colombia was deprived of its sovereignty over the territory in 
which the company’s railroad and property are located, and the Republic of Pan¬ 
ama has taken the place of the Republic of Colombia in the contract of concession 
with this company. In view of the change which had thus occurred, and to show 
its intention of loyally fulfilling its duties, the Republic of Panama at once, through 
its duly qualified commissioners (then in this city), gave formal notice to this com¬ 
pany that the Republic assumed for itself all of the obligations of that contract 
toward this company, which action was later ratified by their Government, and for¬ 
mally concurred in by the Panama Railroad Company. 

The condition of the company’s property has been fully maintained and some 
improvements added, for the interesting account of which I refer you to the general 
manager’s report, . . 

I again refer you to the other accompanying reports for more detailed particulars. 

Respectfully submitted. 

,T.. Edward Simmons, 1 'resident. 


Panama Railroad Company, 

New York, March IS, 1904- 

To the President of the Panama Railroad Company. 

Sir: I respectfully submit the following report of the business and operations of 
the Panama Railroad Company for the year ending December 31, 1903, and of the 
condition of the company’s property. 

The operations of the year show the following results: 

Statement of earnings and expenditures. 


EARNINGS. 

Railroad: 

Colon to Panama— 

Freight. 

Treasure . 

Mails. 

Extra baggage. 

Passengers. 


Panama to Colon- 

Freight . 

Treasure . 

Mails. 

Extra baggage. 
Passengers. 


Total earnings of railroad ... 

Panama Railroad Steamship Line: 

Atlantic service— 

Freight. 

Treasure . 

Mails. 

Extra baggage. 

Passengers. 

Miscellaneous. 


Pacific service- 

Freight . 

Passengers.... 
Extra baggage 


1903. 

1902. 

Increase. 

Decrease. 

1607,614. 99 
7,900.98 
50,296.41 

8,495.64 
32, 759.08 

$559,392.30 
7,223.08 
49.402.46 
8,816.26 
31,735.21 

$48,222.69 
677.90 
893. 95 

1,023.87 

$320.62 

707,067.10 

656,569. 31 

50,497. 79 


500,010.29 
15,137.63 
5,178. 90 
7,514. 43 
32,662. 56 

522,667.88 
16.035.16 
4,818.45 
7,142. 35 
32,112.16 

360.45 
372.08 
550.40 

22, 657.59 
897.53 

. 

560,503.81 

582,776.00 

. 

22,272.19 

1,267,570.91 

1,239,345.31 

28,225.60 


674.440.02 
5,119.86 
81.015.34 
1,905. 90 
154,238.89 
3,859.90 

652,966.87 
5,556.51 
83,013. 99 
1,945.07 
1.50,824.81 
4,008.88 

21,473.15 

3,414.08 

436.65 
1,998.65 
39.17 

148. 98 

920,579. 91 

898,316.13 

22,263. 78 


a 164.98 

161,051.32 

6,029.00 

37.91 


161,216.30 
6,029.00 
37.91 





ol64.98 

167,118. 23 

. 167,283.21 

476,065. 45 

458,035.96 

18,029.49 


2,664,051.29 

2,762,815.63 


98,764.34 


Joint railroad and steamship receipts 
Total earnings. 


a Debit, 


























































































INVESTIGATION OF PANAMA RAILWAY COMPANY 


305 


Statement of earnings and expenditures —Continued. 


EXPENDITURES. 


1903. 


1902. 


Increase. 


Decrease. 


Operating expenses of railroad: 

General expenses on Isthmus. 

Conducting transportation. 

Maintenance of equipment. 

Maintenance of way and structures 


Panama Railroad Steamship Line: 

Atlantic service— 

Steamer expenses. 

Agency expenses. 

Charter of steamers.. 

Expenses steamer Advance, out of com¬ 
mission . 

Expenses steamer Finance, out of com¬ 
mission . 


Pacific service— 

Steamer expenses.. 
Agency expenses «. 
Charter of steamers 


Joint railroad and steamship expenses 


Total operating expenses. 1, 


Earnings over operating expenses 


Appropriations for depreciation and special 
repairs of steamers and tugs: 

Replacement of boilers and special repairs 

of steamers. 

Depreciation of tugs. 

Replacement of boilers and special repairs 
of tugs. 


Fixed charges: 

Subsidy to Republic of Colombia &. 

Redemption of subsidy bonds. 

Interest on subsidy bonds. 

Interest on first mortgage bonds. 

Redemption of first mortgage bonds. 

Interest on balance due La Boca wharf 
contractors. 


Total appropriations and fixed charges... 
Net income. 


$41,356.41 
338,303. 93 
113,765. 69 
68,814.16 


$42,838. 36 
342,321.45 
118.080. 25 
91,469.93 


562,240.19 594,709.99 


519,298.10 
105,204. 52 
234,104.17 

3, 676. 07 

3,220. 92 


865,503. 78 


1,601.46 


1,601.46 


317,342.56 


746,687.99 


917, 363.30 


6 , 750.00 

2 , 100.00 

4,800.00 


13,650.00 


25,000.00 
162,060. 00 
62,940. 00 
102, 645.00 
150,000.00 


502,645.00 


552,276. 86 
117,137.92 
120,570.19 


789,984. 97 


91, 444.93 
54, 019. 67 
106, 862.50 


252,327.10 


319,093. 71 


1,956,115.77 


806,699. 86 


2,100.00 

3, 900. 00 


6,000. 00 


$1,481.95 
4,017.52 
4,314.56 
22,655.77 


32,469.80 


$113,533. 
3,676. 
3,220. 


75,518.81 


110,663.44 


6,750.00 
900.00 


7, 650.00 


25,000. 00 
152,880.00 
72,120. 00 
99,882.50 
150,000.00 

5,432.96 


505, 315.46 


516,295. 00 


401,068. 30 


511,315.46 


295,384.40 


9,180. 00 
' 2, 762.' 50 


4, 979.54 


105,683.90 


32,978. 76 
11,933. 40 


89,843.47 
54,019.67 
106,862.50 


250,725.64 


1,751.15 


209,427.78 


9,180.00 


5,432. 96 


2,670. 46 


a Includes wharfage at La Boca. & Republic of Panama after November 3,1903. 

Gross revenue receipts, expenditures, and net earnings for 1903, compare, as under, 
with those of 1902. 



Earnings. 

Operating ex¬ 
penses. 

Earnings 
over oper¬ 
ating ex¬ 
penses. 

Appropria¬ 
tions for de¬ 
preciations, 
etc. 

Net earn¬ 
ings. 

1903. 

1902. 

Inprpase in 1903 .. 

$2,664,051.29 
2,762,815.63 

$1,746,687.09 
1,956,115.77 

$917,363.30 
806,699.86 

$13,650.00 
6 ,000. 00 

$903,713.30 
800,699.86 



110,663.44 

7,650.00 

103,013.44 

TIpnrpflQP in 1Q03 

98,764.34 

_ 

209,427.78 

Decrease in fixed charges, 190? 

Increase in profit, 1903 .. 


2,670.46 

105,683.90 



PAN ry —05 


•20 



































































































































306 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Earnings. 

railroad. 

The total earnings of the railroad proper show an increase of $28,225.60, or 2.28 per 
cent, over the earnings of last year. West-bound freight earnings increased $48,222.69, 
while east-bound earnings decreased $22,657.59, thus making a net increase in freight 
earnings of $25,565.10. Passenger earnings increased $1,574.27 and mail earnings 
$1,254.40. 

Freight traffic destined to South Pacific ports increased 4,000 tons from New York 
and 7,000 tons from Europe, while there was a decrease in traffic from ports south of 
Panama to New York of 10,000 tons, and to Europe of 5,000 tons, as compared with 
last year—a total of 15,000 tons. In 1902 traffic from this territory was 18,000 tons 
less than in 1901. This continued falling off in tonnage from South Pacific ports is 
to be greatly deplored, and earnest efforts are being made to stop it. 

Traffic to and from Central America and Mexico increased about 10 per cent over 
1902. 

The following table shows the freight tonnage carried over the railroad in 1903, as 
compared with 1902: 

[Ton of 2,000 pounds, or 40 cubic feet.] 


Years ending December 21. 



1903. 

1902. 

Increase. 

Decrease. 

West bound. 

187,796 
161,742 

180,267 
166,422 

Per cent. 
4.18 

Per cent. 

East bound 

2.81 

Total.. 


349,538 

346,689 

.82 





The gross earnings per ton moved on the road compare as follows: 



Year ending De¬ 
cember 31— 

Increase. 

Decrease. 

1903. 

1902. 

West bound. 

$3.25 

3.09 

$3.11 
3.14 

Per cent. 
4.50 

Per cent. 

East bound. 

1.59 

Average east and west bound. 


3.17 

3.13 

1.28 





Table No. 4, accompanying this report, shows the origin and destination of the 
freight carried over the railroad. 

Compared with 1902 the total tonnage transported over the railroad in 1903 shows 
an increase of 2,849 tons, or 0.82 per cent, and the total earnings from freight an 
increase of $25,565.10 or 2.36 per cent. 

Of the total tonnage carried, 53.73 per cent was west bound and 46.27 per cent east 
bound. In 1902 these percentages were 52 per cent and 48 per cent, respectively. 

The proportion of through traffic to the total tonnage handled was 80.61 per cent; 
in 1902 through freight amounted to 78.61 per cent. 

Coal comprised 52.51 per cent of the local traffic west bound. 

The following statements show the number of passengers carried and the passenger 
earnings: 


Classification. 

Number of 
passengers 
carried— 

Increase. 

Decrease. 

Passenger earnings— 

Increase. 

Decrease. 

1903. 

1902. 

1903. 

1902. 

First-class. 

4,636 
73,229 

3,862 

76,946 

Per cent. 
20.04 

Per cent. 

$28,114.04 
37,307.60 

$25,631.78 
38,215.59 

Per cent. 
9.68 

Per cent. 

Second-class. 

4.83 

2.38 

Total. 



77,865 

808,08 


3.64 

65,421.64 

63,847.37 

2.47 






































































INVESTIGATION OF PANAMA RAILWAY COMPANY. 307 


Average receipt per passenger. 


Classification. 

1903. 

1902. 

Increase. 

Decrease. 

First-class passengers: 

Through. 

89.03 
3.08 

4.87 

.42 

88 .97 
3. 58 

3.96 

.42 

Per cent. 
0.66 

Per cent. 

Local . 

13.97 

Second-class passengers: 

Through. 

22.98 

Local . 






The total passenger earning amounted to $65,421.64, an increase of $1,574.27, or 
2.47 per cent. First-class passengers increased 774, or 20.04 percent, in number, and 
$2,482.26 in earnings, or 9.68 per cent, while second-class passengers decreased 3,717, 
or 4.83 per cent, in number, and $907.99, or 2.38 per cent, in earnings. 

STEAMSHIP LINES. 

The total earnings of the Atlantic line from all sources amounted to $920,579.91, 
an increase of $22,263.78, or 2.48 per cent. Of this increase $21,473.15 was in freight 
traffic, the tonnage of which remained practically the same as last year. 

Of the total tonnage transported 41,260 tons were carried by the company’s 
steamers and 117,049 by chartered steamers. In 1902 the former carried 104,062 
tons and the latter 54,340 tons. 

The Pacitic line accounts show a debit to freight earnings of $164.98 for overcharges 
settled during the year. 

JOINT RAILROAD AND STEAMSHIP RECEIPTS. 

The total receipts of all the accounts grouped together under this heading amounted 
to $476,065.45, an increase of $18,029.49, or 3.94 per cent, as compared with 1902. 
There is included in this total the sum realized in September last from the assign¬ 
ment of the credit allowed this company in December, 1891, by the comptroller of 
the State of New York, upon revision and readjustment by him of the taxes paid on 
the capital stock for the years 1881, 1882, 1883, and 1884. 

The following table will show the number of tons lightered in Panama Bay and 
handled on La Boca wharf during the year 1903, as compared with 1902: 



1903. 

1902. 

Increase. 

Decrease. 

Merchandise. 

Tons. 
202,439 
191 
8,556 

Tons. 
209,086 
38 
20,980 

Per cent. 

Per cent. 
3.18 

Lumber. 

402.63 

Coal. 

59.22 

Total. 


211,186 

230,104 


8.22 




■ EXPENDITURES. 

The revenue expenditures of 1903 and 1902 compare as under: 


Railroad. 

Steamship line: 

Atlantic service. 

Pacific service. 

Joint railroad and steamship expenses. 

Appropriations for depreciation and special re¬ 
pairs of steamers and tugs. 

Total. 


1903. 

1902. 

Increase. 

Decrease. 

$562,240.19 

865,503.78 
1,601.46 
317,342. 56 

13,650. 00 

$594,709. 99 

789,984. 97 
252,327.10 
319, 093.71 

6 ,000. 00 


$32,469.80 

$75,518.81 

250, 725. 64 
1,751.15 


7, 650.00 


1,760,337. 99 

1,962,115. 77 


201,777.78 



This table shows a decrease of $201,777.78 in total revenue expenditures, while there 
was a decrease of $98,764.34 in total earnings. 

































































308 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Railroad. 

CONDUCTING TRANSPORTATION. 

The expenses of this department, compared with 1902, show a decrease of $4,017.52, 
or 1.17 per cent, while the total tonnage moved increased 2,849 tons, or 0.82 per 
cent. 

An important expense was incurred by the free transportation of marines and 
sailors of the United States engaged in maintaining the security of the transit upon 
the Isthmus. 

From January 1 to December 31, 1903, there were also transported, without charge, 
5,755 troops and 11,098 officials of the Republics of Colombia and of Panama. 

MAINTENANCE OF EQUIPMENT. 

The total charges or expenses under this heading amounted to $113,765.69, a 
decrease of $4,314.56, or 3.65 per cent, as compared with last year. 

During the last year engines Nos. 2, 3, 10, 30, 34, 36, and 37 were thoroughly 
repaired, No. 10 having also received a new boiler. Twenty-three others received 
ordinary running repairs. Many of these will need new boilers during this year and 
next. 

The passenger equipment is all in good condition, requiring only usual running 
repairs; 9 coaches and 4 baggage cars were completely overhauled during 1903. Gen¬ 
eral repairs, amounting to rebuilding, Avere given to 79 box cars, 16 coal, 26 flat, 9 
stock cars, and 1 caboose; also, there were rebuilt for the road department 1 tool 
car, 1 derrick car, and 4 camp cars. The entire freight equipment is therefore in 
good order. 

MAINTENANCE OF WAY AND STRUCTURES. 

The track, bridges, and station buildings have been maintained in good condition, 
at an expenditure of $68,814.16, a decrease of $22,655.77,' or 24.77 per cent. 

A stone pier and steel trestle have been erected under the bridge over the Rio 
Grande upon the Culebra deviation and the floor system reinforced by arrangement 
with the canal company, and trains are now operated over the bridge without slow¬ 
ing down. It was necessary also to strengthen two other iron bridges, and because 
of severe floods to rebuild the ends of 22 stone culverts. 

STEAMSHIP LINES. 

The operating expenses of the Atlantic line (which include $6,896.99 for expenses 
of steamships Advance and Finance while out of commission and not undergoing 
repairs) were $865,503.78, an increase of $75,518.81, or 9.56 per cent. 

The steamship Finance was laid off on January 27, 1903, and her place in the line 
supplied by the chartering of an American steamship, since which date only one 
vessel of the company’s fleet, the steamship Allianca , has been operated. 

To maintain a weekly service and provide sufficient tonnage three chartered pas¬ 
senger vessels have been employed during most of the year, the payments for hire 
of steamers exceeding those of last year by $113,533.98. 

The Pacific line accounts show a total charge to steamer expenses of $1,601.46, 
which is almost wholly for loss and damage freight claims settled during the year. 

JOINT RAILROAD AND STEAMSHIP EXPENSES. 

The combined expenditures under this head, which include general expenses, 
foreign agency expenses, lighterage, docks and wharves, real estate, etc., amounted 
to $317,342.56, a decrease of $1,751.15, or 0.55 per cent. 

The floating equipment in Panama Bay has been well maintained, except launches 
1, 2, 4, and 5, not worth extensive repairs; all launches have, however, been scraped 
and painted; also the tug Ancon. The Bolivar has been in use during the entire 
year and is in thoroughly good condition. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


309 


GENERAL REMARKS. 

During the period from 1894 to 1903, inclusive, the percentage of total expenses to 
gross earnings was as follows: 

Per cent. 


1894 . 69.93 

1895 . 61.63 

1896... 53.94 

1897 (including taxes and appropriations for depreciation, etc.). 61.12 

1898 (including taxes and appropriations for depreciation, etc.). 64. 91 

1899 (including taxes and appropriations for depreciation, etc.). 64. 66 

1900 (including taxes and appropriations for depreciation, etc.). 65. 25 

iq 0 i/(including taxes and appropriations for depreciation, etc.). 64. 72 

\ (or including Pacific line not operated in 1900). 76. 34 

1909 /(including taxes and appropriations for depreciation, etc.). 65.87 

\(or including Pacific line operated for six months). 71. 02 

1903 (including appropriations for depreciation and special repairs).66.01 


Extensive repairs to the boilers, hull, and rigging of the steamship Advance , begun 
in November, 1902, were discontinued upon the boilers being condemned and the 
preliminary work on the hull showing up other defects, to correct which required 
the practical rebuilding of the ship, not contemplated then. In October, 1903, sev¬ 
eral shoe plates of the steamship Allianca were renewed, bulkhead plating replaced 
where corroded, etc. Of the total outlays for these repairs, $23,007.71 was carried to 
the debit of “Fund for replacement of boilers and special repairs to steamers and 
tugs,” and $6,750 was appropriated out of net earnings and credited to said account 
as this year’s proportion of such expenditures. 

On November 30 a contract was concluded with the firm of Wm. Cramp & Sons 
for the rebuilding of the Advance and Finance , both of these steamships being now 
in their shipyard at Philadelphia in process of reconstruction. 

The dredging of the basins and of the maritime channel at La Boca has been con¬ 
tinued steadily through the year with one powerful dredge; the necessary depths have 
been maintained. 

The electric transporters procured last year required the erection of a consider¬ 
able addition to the electric plant and to the conducting wires, which have been 
installed, and the whole are in successful operation, with excellent results in the 
handling of cargoes. It was thought judicious, in making these additions, to provide 
for extending the use of electricity to other transporters. 

The wharves at Colon and Panama have received all necessary repairs, with the 
exception of the American wharf at Panama, which will require an expenditure of 
about $4,000. The creosoted piles and timbers required for this work are already on 
the Isthmus. The coal pier and the English wharf have been overhauled, rebraced, 
and put in sound condition. 

The company’s buildings have received the usual expenditure necessary in the 
climate of the Isthmus. Much attention has also been given to the improvement of 
the drainage at Colon in the vicinity of the company’s buildings, .and to the pre¬ 
vention of the breeding of mosquitoes. 

The land department has continued to increase its revenues, showing a larger gain 
over the previous year than in any other year—about $3,400. 

The electric light plant at Colon, operated in connection with the ice plant, con¬ 
tinues to show a small profit. 

The water supply for Panama was improved by the construction of a large well 
at La Boca Junction and an arrangement for piping the water from cars into the 
storage tank at Panama. 

During the year 1903 there was comparative peace on the Isthmus, only disturbed 
by the revolution which resulted in the independence of the Department of Panama 
and the organization of the new Republic, happily without bloodshed or destruction 
of property. 

The thanks of the board are due to the employees of the company for meritorious 
and faithful service. 

Respectfully, 


Charles Paine, General Manager. 














310 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Table A. —Balance sheet, December 31, 1901. 


RESOURCES. 


Cost of road, real estate, and equipment. 

New terminal at La Boca. 

Floating equipment: 

Steamers AUianca, Finance , and Advance, reduced value December 31, 

1902.. 

Tugs and lighters, reduced value December 31,1902.$318,137.53 

Depreciation fund for tugs. 2,100.00 


j$12,045,258.32 


$267, 419. 27 
316,037.53 

- 583,456.80 


Total. 

Bonds in treasury: 

153 6 per cent Panama Railroad Company sinking-fund subsidy bonds. 153,000.00 
935 4i per cent twenty-year gold sinking-fund bonds. 936,037.50 


On deposit with financial agents for redemption of bonds: 

6 per cent subsidy bonds. 

Advance of subsidy to Republic of Colombia. 

Improvement and construction accounts. 

Fund for replacement of boilers and special repairs to steamers and tugs 


Current assets: 

Cash in banks and with agents. 469,994.66 

Coal and supplies on hand.. 176,412.86 

Due from connecting companies. 108,060,58 

Due from United States Government. 24,437.16 

Due from Republic of Colombia. 4,999.93 

Due from companies and individuals.. 48,078.50 

Accrued interest on deposits. 13,682.96 

Accrued interest on securities owned. 1,777.50 

Unadjusted accounts. 12,513.33 

Prepaid insurance and charter of steamers. 17,595.93 


12, 628,715.12 


1,089,037.50 

10,000.00 
887, 000. 00 
55,570.50 
34,002.59 


877, 553. 41 


15,581,879.12 


LIABILITIES. 


Capital stock. $7,000,000.00 

4| per cent twenty-vear sinking-fund gold bonds (authorized issue, 

$4,000,000): 

Issued to date (4,000 bonds, less 701 bonds previously redeemed).$3,299,000.00 

Drawn for redemption in 1903. 140,000.00 

' -. 3,159,000.00 


Total capital stock and mortgage liabilities. 10,159,000.00 

6 per cent gold fund subsidy bonds«. 887,000.00 

Bonds drawn for redemption not presented for payment: 

6 per cent subsidy bonds... 10,000.00 

Accrued interest on bonds: 

4£ per cent twenty-year gold bonds (2,246 bonds). 25,267.50 

6 per cent subsidy bonds. 8,870.00 

- 34,137.50 

Funds for redemption of bonds: 

\\ per cent twenty-year gold bonds. 62,946.78 

6 per cent subsidy bonds. 76,005.00 

- 138,951.78 

Due Republic of Panama. 21,875.00 

Allowance to cover excess interest over contract rate on 4* per cent bonds 
sold to prepay indebtedness due contractors new terminal at La Boca 

on October 15, 1905. 26,061.95 

Current liabilities: 

Isthmus drafts not presented. 11,100.95 

Coupons not presented. 1,562.50 

Audited vouchers. 97,941.51 

Unclaimed dividends. 119.00 

Due deceased or missing employees. 2,199.02 

- 112,922.98 

Balance to credit of profit and loss.. 4,191,929.91 


15,581,879.12 


a 887 6 per cent gold sinking-fund subsidy bonds of $1,000 each, amounting to $887,000, issued Novem¬ 
ber 1, 1880, fall due November 1, 1910. 

To meet this bonded indebtedness, $225,000 annually of the Colombian Government subsidy was 
pledged till March 27, 1908, the same to be applied by the company, first, to the payment of the 
interest, and. second, as a cumulative sinking fund for the redemption of the principal; the bonds to 
be drawn yearly in September to an amount equal to the then surplus of the subsidy sinking fund, the 
drawn bonds to be paid on November 1, after each drawing, and thereby redeeming the whole issue 
in 1908. 

S. Deming, Treasurer. 
























































INVESTIGATION OF PANAMA RAILWAY COMPANY 


311 


Table B. — Profit and loss account, December 31, 1903. 

Debit. 

To one hundred and sixteenth dividend. $140,000.00 

one hundred and seventeenth dividend. 140,000.00 

one hundred and eighteenth dividend. 280,000.00 

Operating expenses. 1,746,852.97 

Appropriations for depreciation of tugs and special repairs of steamers and tugs. 13,650.00 

Fixed charges. 502,645.00 

Uncollectible accounts, etc., written off. 29.85 

Balance, assets over liabilities, December 31, 1903. 4,191,929.91 


7,015,107.73 

Credit. 

By balance, December 31, 1902. $4,201,587.09 

Gross earnings. 2,664,216.27 

4£ per cent twenty-year sinking-fund gold bonds redeemed. 140,000.00 

Adjustment of accounts of previous years... 8,764.37 

Value of fittings taken from dismantled lighters, etc. 540.00 


7,015 107.73 



















APPENDIX. 


Board of directors, Panama Railroad Company. 
[Elected April 4, 1904.] 


Name. 

Re¬ 

signed. 

Replaced by— 

Date. 

J. Edward Simmons 

1904. 


1904. 

Geo. Whaley. 

Sept. 15 

W. B. Parsons. 

Sept. 15. 

E. A. Drake. 


S. M. Felton_ 




J. H. Parker. 




Wm. N. Cromwell. 




Vernon H. Brown. . 




Chas. EinsiecUer. 

July 14 
Oct. 27 
_do ... 

J. G. Walker. 

July 14. 
Oct. 27. 
Do. 
Do. 

July 14. 
Do. 

R. M. Gallawav. 

G. W. Davis. 

A. L. Hopkins. 

B. M. Harrod. 

C. B. Comstock. 

_do ... 

F. G. Hecker. 

J. G. Buchanan. 

July 14 
_do ... 

W. H. Burr. 

C. Paine. 

C. E. Grunsky. 

F. G. Hecker. 

Nov. 23 

Vacancy ..... 





At present— 

12 directors acting. 
1 vacancy. 

13 


There has been one dividend declared by the board of directors of the Panama 
Railroad Company since the election to the board of the members of the Isthmian 
Canal Commission, and that was of 5 per cent, payable February 1, 1905. 

On that day checks were mailed to the members of the Isthmian Canal Commission 
as follows: 

To Admiral J. G. Walker for $5, same being 5 per cent on 1 share standing in his 
name. 

To Admiral J. G. Walker, chairman Isthmian Canal Commission, for $470, same 
being 5 per cent on 94 shares standing in his name as chairman of the Isthmian Canal 
Commission. 

To Wm. H. Burr for $5, same being 5 per cent on 1 share standing in his name. 

To C. E. Grunsky for $5, same being 5 per cent on 1 share standing in his name. 

To Wm. B. Parsons for $5, same being 5 per cent on 1 share standing in his name. 

To G. W. Davis for $5, same being 5 per cent on 1 share standing in his name. 

To F. G. Hecker for $5, same being 5 per cent on 1 share standing in his name. 

To B. M. Harrod for $5, same being 5 per cent on 1 share standing in his name. 

Total payment, $505 on 101 shares. 


312 


































INVESTIGATION OF PANAMA RAILWAY COMPANY. 313 

Statement of fees paid to directors of the Panama Railroad Company who are members of 

the Isthmian Canal Commission. 


Date. 


1904. 


July 

14 

July 

26 

Sept. 

15 

Sept. 

22 

Oct. 

13 

Oct. 

14 

Oct. 

18 

Oct. 

21 

Oct. 

25 

Oct. 

27 

Oct. 

28 

Nov. 

1 

Nov. 

9 

Nov. 

10 

Nov. 

18 

Nov. 

22 

Nov. 

23 

Nov. 

25 

Nov. 

29 

Dec. 

2 

Dec. 

6 

Dec. 

8 

Dec. 

9 

Dec. 

16 

Dec. 

20 

Dec. 

22 

Dec. 

23 

Dec. 

27 


1905. 
Jan. 3 
Jan. 6 
Jan. 10 


Jan. 12 


Jan. 13 
Jan. 30 

Feb. 8 


Meeting. 

Directors present. 

Amount 

paid 

each. 

Board . 

fj. G. Walker. 

$25 

\W. H. Burr . 

25 


fj. G. Walker. 

25 

.do. 

hV. H. Burr. 

25 


|C. E. Grunsky. 

25 

.do. 

W. H. Burr. 

25 


|J. G. Walker. 

25 

.do. 

•|C. E. Grunsky. 

25 


|Wm. B. Parsons. 

25 


fj. G. Walker. 

25 

i.do. 

JW. H. Burr. 

25 

1C. E. Grunsky. 

25 


[Wm. B. Parsons. 

25 

Committee. 

.do. 

10 

.do. 

.do. 

10 

.do. 

.do. 

10 

.do. 

.do. 

10 


fJ. G. Walker. 

25 

Board . 

Jw. H. Burr. 

25 


lC. E. Grunsky. 

25 

Committee. 

Wm. B. Parsons. 

10 

.do. 

.do. 

10 

.do. 

.do. 

10 


fj. G. Walker. 

25 


W. H. Burr. 

25 

Board . 

C. E. Grunsky. 

25 


Wm. B. Parsons. 

25 


B. M. Harrod. 

25 

Committee. 

Wm. B. Parsons. 

10 

. .do. 

,. .do. 

10 


fW. H. Burr. 

25 

Board. 

Jc. E. Grunsky. 

25 

1 Wm. B. Parsons. 

25 


[b M. Harrod. 

25 

Committee. 

Wm. B. Parsons. 

10 

.. do. 

.. .do. 

10 

do .. 

.do. 

10 

do 

do . 

10 


|W H Burr . 

25 


Jc E Grunsky. 

25 






25 


[p M Harrod. 

25 

Pommi ttpp 

Wm P Parsons ... 

10 

do 

do. 

10 

do 

do. 

10 


ij G Walker. 

25 


Jw H Burr . 

25 

Board . 

1c E Grunskv. 

25 


1 Wm. B. Parsons. 

25 

Onmmittaft _ 

do. 

10 

do 

do. 

10 

do 

do . 

10 

do 

do. 

10 

do 

do. 

10 


f.f rt Walkor . 

25 


W H Burr . 

25 


-ft g Grunsky ... 

25 


Wm. B. Parsons. 

25 


g yj Harrod . 

25 


Wm P Parsons.... 

10 


j G Walker . 

25 


( do ...... 

25 


•Jc E Grunskv . 

25 


Ib M Harrod* . 

25 






















































































































































314 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Statement of fees paid to directors of the Panama Railroad Company who are members of 
the Isthmian Canal Commission —Continued. 


SUMMARY. 


Name of director. 

Meetings attended. 

Total of 
fees re¬ 
ceived. 

Commit¬ 
tee, at $10. 

Board of 
directors, 
at $25. 

.T <x Walker . 


10 

$250 

W IT Rnrr . 


10 

250 

C. E Grunskv. 


10 

250 

Wm. B. Parsons. 

22 

7 

395 

R M Ha.rrod . 


5 

125 






Total of fees received by directors of Panama Railroad Company who are members of the Isthmian 
Canal Commission, for attendance at meetings of the board of directors and executive and finance 
committee, $1,270. 


Attendance fees paid by Panama Railroad Company to Director J. G. Walker. 


Date of election 

Meetings attended. 

Fees 

as director. 

Board. 

Committee. 

received. 

1904. 

.Tilly 14 

1904. 

July 14 . 


$25 


Julv 26. 


25 


September 22... 


25 


October 13. 


25 


October 27. 


25 


November 10. 


25 


December 22. 


25 


1905. 

January 12. 


25 


January 30. 


25 


Fehruarv 8.. 


25 





Total. 




250 





Attendance fees paid by Panama Railroad Company to Director W. H. Burr. 


Date of election 
as director. 

Meetings attended. 

Fees 

received. 

Board. 

Committee. 

1904. 

July 14. 

1904. 

Julv 14. 


v $25 

25 
25 
25 
25 
25 
25 
25 
25 

25 

Total. 

Julv 26. 


September 15. 


October 13. 


October 27. 


November 10. 


November 23. 

. 

Decembers. 


December 22. 

. 

1905. 

January 12. 




250 







































































INVESTIGATION OF PANAMA RAILWAY COMPANY 


315 


Attendance fees paid by Panama Railroad Company to Director C. E. Grunsky. 


Date of election 
as director. 

Meetings attended. 

Fees 

received. 

Board. 

Committee. 

1904. 

July 14. 

1904. 

July 26. 


$25 

25 

25 

25 

25 

25 

25 

25 

25 

25 

Total. 

September 22. 


October 13. 


October 27. 


November 10. 


November 23. 


Decembers__ 


December 22._..1_ 

1905. 

January 12. 


February 8. 




250 





Attendance fees paid by Panama Railroad Company to Director Wm. B. Parsons. 


Date of election as 
director. 

Meetings attended. 

Fees 

received. 

Board. 

Committee. 

1904. 

1904. 

1904. 


Sept 15 

September 22. 


$25 


October 13. 


25 



October 14. 

10 



October 18. 

10 



October 21. 

10 



October 25. 

10 



October 28. 

10 



November 1. 

10 



November 9. 

10 


November 10. 


25 



November 18. 

10 



November 22. 

10 


November 93. 


25 



November 25. 

10 



November 29. 

10 



December 2. 

10 



December 6. 

10 


December 8. 


25 



December 9. 

10 



December 16. 

10 



December 20. 

10 


December 22. 


25 



December 23. 

10 



December 27. 

10 


0 

1905. 




J anuary 3. 

10 



January 6. 

10 



January 10. 

10 


1905. 




.Tfl.nnH.ry 12. 


25 



January 13.. 

10 

Total 



395 






From directors’ meeting. $175 

From committee meetings.. 220 


























































































316 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


/ 


Attendance fees paid by Panama Railroad Company to Director B. M. Harrod. 


Date of election as 
director. 

Meetings attended. 

Fees 

received 

Board. 

Committee. 

1904. 

1904. 



October 27. 

November 10.. 


$25 


November 28 .. 


25 


December 8 .. 


25 


1905. 




January 12 


25 


February 8 . 


25 

Total_ 



125 

S 




Isthmian Canal Commission, 
Washington, D. C., February 18, 1905. 

Hon. W. P. Hepburn, 

Chairman Committee on Interstate and Foreign Commerce. 

Sir: Referring to the testimony before your committee yesterday, concerning the 
acceptance by members of the Isthmian Canal Commission of fees for attendance at 
meetings of the board of directors of the Panama Railroad Company, I beg that you 
will submit to your committee the following extract from the minutes of the Com¬ 
mission of October 11: 

‘ ‘ The Commissioners were also informed by the chairman that at a recent conference 
with the President the matter of the attendance fee paid to the directors attending 
meetings provided by the by-laws of the Panama Railroad Company was referred to, 
and that the President desired the Commission to be informed that his order fixing 
the compensation of the Commissioners was not intended to prevent the acceptance 
of such fee.” 

My connection with the board as a director was subsequent to the settlement of 
the question as above cited. 

Respectfully, B. M. Harrod. 


Isthmian Canal Commission, 
Washington, D. C., February 18, 1905. 

Hon. Wm. P. Hepburn, 

Chairman Interstate and Foreign Commerce Committee, 

House of Representatives. 


Dear Sir: Bearing upon the matter of attendance fees paid to the directors of the 
Panama Railroad Company, I inclose for your information, and for such use as you 
may desire to make thereof, a carbon copy of a letter written by me to the secretary 
of the board of directors in reference to this matter. 

I desire to ask your attention also to the following extract from the minutes of the 
Commission’s proceedings on October 11, 1904: 

“The commissioners were also informed by the chairman that at a recent confer¬ 
ence with the President the matter of the attendance fee, paid to the directors 
attending meetings provided by the by-laws of the Panama Railroad Company was 
referred to, and that the President desired the Commission to be informed that his 
order, fixing compensation of the commissioners, was not intended to prevent the 
acceptance of such fee. ’ ’ 

Very respectfully, 


C. E. Grunsky. 


Steamship Finance, September 13, 1904. 

Mr. E. A. Drake, 

Secretary Board of Directors Panama Railroad Company, 

24 State Street, New York City, N. Y. 

Dear Sir: Inclosed I hand you, unopened, an envelope that was handed to me at 
the close of the first and only directors’ meeting, July 26, which I have attended. 
It contains I suppose the attendance fee to which the directors are entitled under the 
company’s by-laws. I did not insist upon declining this fee at the time it was 
handed me in order to avoid possible embarrassment of my associates, and because 
I desired to read again the President’s letter which makes our services on the board 
of directors a part of our official duties for which we are otherwise compensated. I 





















INVESTIGATION OF PANAMA RAILWAY COMPANY. 317 

can not construe the attendance fee other than compensation, and therefore must 
decline to accept any such fee for attendance at meetings. 

As our board of directors must be considered to be acting for and in the interest of 
the owners of the Panama Railroad, and in this case there is practically sole owner¬ 
ship by the United States, no action should be taken which is not in accord wdth the 
views of the proper United States authorities. It has not been possible for me to 
ascertain as yet what the wishes of these authorities are in the matter of building 
new ships and increasing indebtedness. For this reason I must ask you to convey 
to the executive committee a suggestion from me that no steps be taken in this mat¬ 
ter beyond planning the ships, until there is no further question as to the wish of the 
majority stockholder in this matter. I speak of course for myself only, and this 
letter will indicate to you that one director at least has not yet been able to learn, 
either through the Commission or otherwise, what the United States wants done. 

Yours, very respectfully, 

C. E. Grunsky. 


A. N. 39, 500. Dec. ’03. Tariff No. 2—C. T. (Supersedes conflicting rates of 
earlier date. ) “ Panama route.” Panama R. R. Steamship Line, Panama Railroad, 

and connecting steamer lines. Tariff of freight rates from New’ York and common 
points to California terminals, viz, Sacramento and Stockton. Taking effect January 
18, 1904. (Subject to change without notice.) Mark and consign all shipments to 
the care of Panama R. R. Steamship Line, 24 State St., New York. R. L. Walker, 
traffic manager; A. E. Paterson, contracting agent; 24 State street, New York. B. H. 
Langley, agent, 421 Market street, San Francisco. 

From New York and common points « to Sacramento and Stockton, Cal. 


Class rates, subject to the western classification . 
[In cents per 100 pounds.] 


1 . 

2. 

3. 

4. 

5. 

A. 

B. 

C. 

D. 

E. 

180 

150 

130 

115 

105 

105 

85 

80 

80 

70 


Subject to change wdthout notice. Commodity rates from New York will be those 
of “ Sunset” Tariff, No. C 22. Effective January 18, 1904, and supplements thereto, 
less the following discounts: Carloads, 20 per cent; less carloads, 30 per cent, observ¬ 
ing minimum of 50 cents per 100 pounds. Minimum charge for any single shipment 
will be $3.50. 

In addition to the regular transportation charges provided above, shipments are 
subject to toll levied in San Francisco by the State of California. Freight received 
at Pier 67, North River, New York City. Shipments from Philadelphia should be 
forwarded by the “Clyde Line.” Shipments from Baltimore should be forwarded 
by the “ New York and Baltimore Transportation Line.” Shipments from Boston 
should be forwarded by either “ Fall River Line,” “ Metropolitan S. S. Co.,” “New 
England Railroad,” “Norwich Line” or “Providence Line.” New York, December 
22, 1903. 

A. N. 39, 1000, July, ‘04. Tariff No. 4.—S. C. (Supersedes conflicting rates of 
earlier date.) “Panama route.” Panama R. R. Steamship Line, Panama Rail¬ 
road, and connecting steamer lines. Tariff of freight rates from New York and com¬ 
mon points to Southern California points, viz, Los Angeles, San Diego, and Santa 
Barbara. Taking effect July 1, 1904 (subject to change without notice). Mark and 
consign all shipments to the care of Panama R. R. Steamship Line, 24 State street, 
New York. R. L. Walker, traffic manager; A. E. Paterson, contracting agent; 
24 State street, New York. B. H. Langley, agent, 421 Market street, San Francisco. 

From New r York and common points to Los Angeles, San Diego, and Santa Bar¬ 
bara, California. 


a When through rates are 70 cents per 100 pounds or over, via the Panama route, 
they will apply from Boston, Philadelphia, Baltimore and common points, provided 
the local freight charges to New York plus transfer do not exceed 20 cents per 100 
pounds, and provided further, that all shipments from points outside of New York 
city are consigned to the care of Panama Railroad Steamship Line, 24 State St., 
New York. 
















318 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Class rates, subject to the western classification. 
[In cents per 100 pounds.] 


1 

2 

3 

4 

5 

A 

B 

C 

D 

E 

180 

150 

130 

115 

105 

105 

85 

80 

80 

70 


Subject to change without notice. Commodity rates from New York will be those 
of transcontinental west-bound tariffs in effect at time of shipment less the following 
discounts: Carloads, 20 per cent; less carloads, 30 per cent; observing minimum of 
60 cents per 100 pounds. Minimum charge for any single shipment will be $3.50. 
Charges from interior points plus transfer in New York will be absorbed out of the 
through rates when not in excess of 20 cents per 100 pounds, but in no case can 
maximum absorption leave less than 60 cents per 100 pounds, from New York to 
Pacific Coast terminals mentioned. All shipments from points outside of New York 
City must be consigned to the care of Panama Railroad Steamship Line, 24 State 
St., New York. In addition to the regular transportation charges provided 
above, shipments are subject to toll levied in San Francisco by the State of Cali¬ 
fornia. Freight received at pier, foot West 27th St., New York City. Ship¬ 
ments from Philadelphia should be forwarded by the “ Clyde Line.” Shipments 
from Baltimore should be forwarded by the “New York and Baltimore Transporta¬ 
tion Line.” Shipments from Boston should be forwarded by either “Fall River 
Line,” “Metropolitan S. S. Co.,” “New England Railroad,” “Norwich Line,” or 
“Providence Line.” New York, July 1, 1904. 


Tariff No. 6—N. P. C. (Supersedes conflicting rates of earlier date.) “Panama 
Route.” Panama R. R. Steamship Line, Panama Railroad, Pacific Mail Steamship 
Co., connecting in San Francisco with the Oregon Railroad and Navigation Co. 
and Pacific Coast S. S. Co. Tariff of freight rates from New York to North Pacific 
coast points, viz: Portland, Astoria, Seattle, Tacoma, Port Townsend, Everett, 
Anacortes, New Whatcom (Bellingham Bay), Vancouver and Victoria, taking effect 
July 1, 1904 (subject to change without notice). Mark and consign all shipments 
to the care of Panama Railroad Steamship Line, 24 State street, New York. R. L. 
Walker, Traffic Manager; A. E. Paterson, Contracting Agent, 24 State street, New 
York. B. H. Langley, Agent, 421 Market street, San Francisco. 

A N 31.-Revised. [1000 July ’04] From New York to North Pacific coast points, 
viz: Portland, Astoria, Seattle, Tacoma, Port Townsend, Everett, Anacortes, New 
Whatcom (Bellingham Bay), Vancouver and Victoria. 

Class rates, subject to the western classification. 

[In cents per 100 pounds.] 


1 

2 

3 

4 

5 

A 

B 

C 

D 

E 

180 

150 

130 

115 

105 

105 

85 

80 

80 

70 


Subject to change without notice. Commodity rates from New York will be those 
of transcontinental west-bound tariffs in effect at time of shipment less the follow¬ 
ing discounts: Carloads, 20 per cent; less carloads, 30 per cent; observing mini¬ 
mum of 60 cents per 100 pounds. Minimum charge for any single shipment will be 
$4. Charges from interior points plus transfer in New York will be absorbed out of 
the through rates when not in excess of 20 cents per 100 pounds, but in no case can 
maximum absorption leave less than 60 cents per 100 pounds from New York to 
Pacific coast terminals mentioned. All shipments from points outside of New York 
City must be consigned to the care of Panama Railroad Steamship Line, 24 State 
street, New York. In addition to the regular transportation charges provided above, 
shipments are subject to toll levied in San Francisco by the State of California. 
Freight received at pier, foot West 27th street, New York City. Shipments from 


































INVESTIGATION OF PANAMA RAILWAY COMPANY. 319 

Philadelphia should be forwarded by the “Clyde Line.” Shipments from Balti¬ 
more should be forwarded by the “New York and Baltimore Transportation Line.” 
Shipments from Boston should be forwarded by either “Fall River Line,” “Metro¬ 
politan S. S. Co.,” “New England Railroad,” “Norwich Line,” or “Providence 
Line.” New York, July 1, 1904. 


PANAMA RAILROAD COMPANY, PANAMA RAILROAD STEAMSHIP LINE. 

Supplement No. 1 to S. F. Rate Circular No. 7, effective January 26, 1904.—Special rates 
°f freight New York to San Francisco.—For use of agents only. 

[Rates are shown in cents per 100 pounds.] 


No. 


Articles. 

From— 

Bolts iron. .carload.. 

l Graphaphones and discs. 

New York.... 

Horseshoes... c&rlo&d 

r]o 

Iron: Bar, band, hoop and plate, pipe, bolts, nuts, rivets, nails; and 
horseshoes, in straight or mixed carloads. 


Lard and lard compounds. Hr. 

Nuts, iron. r'flrlrmri rln 


| Phonographs and materials.. 


j Rivets, iron. carload 

fin 

| Reginas and stands. -.caoaa.. 


Slot machines, boxed. 


Talking machines and supplies. 


Typewriting machines. 




Rate. 


45 

180 

45 

45 

50 

45 

45 

180 

45 

180 

180 

180 

180 


This supplement cancels Supplement No. 1, to S. F. Rate Circular No. 6 effective 
February 5, 1901. 

Effective March 2, 1904. 

R. L. Walker, 

Traffic Manager, 24 State Street, New York. 


A N 16, 2000 Feb. ’04. S. F. Rate Circular No. 7. (Supersedes conflicting rates of 
earlier date.) “Panama route.” Panama R. R. Steamship Line. Panama Rail¬ 
road. Tariff of freight rates from New York and common points to San Francisco. 
Taking effect January 26, 1904. (Subject to change without notice.) Mark and 
consign all shipments to the care of Panama R. R. Steamship Line, 24 State street, 
New York. R. L. Walker, Traffic Manager, A. E. Paterson, Contracting Agent, 24 
State street, New York. B. H. Langley, Agent, 421 Market street, San Francisco. 

From New York and common points « to San Francisco. 

Class rates, subject to the western classification. 

[In cents per 100 pounds.] 


l. 

2. 

3. 

4. 

5. 

A. 

B. 

C. 

D. 

E. 

180 

150 

130 

115 

105 

105 

85 

80 

80 

70 


Subject to change without notice. Commodity rates from New York will be those 
of transcontinental west-bound tariffs in effect at time of shipment less the following 
discounts: Carloads, 20 per cent; less carloads, 30 per cent; observing minimum of 40 


« When through rates are 60 cents per 100 pounds or over via the Panama route, 
they will apply from interior points provided the local freight charges to New York 
plus transfer do not exceed 20 cents per 100 pounds, and provided further, that all 
shipments from points outside of New York City are consigned to the care of Panama 
Railroad Steamship Line, 24 State street, New York. 


























































320 INVESTIGATION Ob' PANAMA RAILWAY COMPANY. 


cents per 100 pounds. Minimum charge for any single shipment Avill be $3 subject 
to the following exceptions from New York: Oil (not petroleum) in barrels or cases 
in carloads, minimum weight 24,000 pounds (calculated on actual gross weight) 50 
cents per 100 pounds. In addition to the regular transportation charges provided 
above, shipments are subject to toll levied in San Francisco by the State of California. 
Freight received at Pier 67, North River, foot West 27th st., New York City. Ship¬ 
ments from Philadelphia should be forwarded by the “Clyde Line.” Shipments 
from Baltimore should be forwarded by the “ New York and Baltimore Transporta¬ 
tion Line.” Shipments from Boston should be forwarded by either “Fall River 
Line,” “Metropolitan S. S. Co.,” “New England Railroad,” “Norwich Line,” or 
“Providence Line.” New York, January 10, 1904. 

A. N. 102. No. 1. Panama Railroad Company, Panama Railroad Steamship Line. 


Tariff of special rates to San Francisco, Cal., from points as indicated belmo—Subject to 

cancellation on 10 days’ notice. 

[Effective August, 1903. For use of agents only. Supersedes change in rate slips Nos. B 120, 145, 353,. 
354, 453, 483, 486, 500, 522, 523, 524, 525, 533, 540,543, 547, 551, 580, 584, 635, 636, 640, 642, 643, 652, 653, 662.] 


For— 

Articles. 

Rate. 

American Wire & 
Steel Co. 

Wire, iron plain or barbed.C. L.. 

45c. pr. 100 
lbs. 

Do. 

Wire, insulated, broom and 
binding, hay and shingle 
bands, wire springs, coppered 
or tinned, wire rope and 
cable (no piece over 4,000 
lbs.).C. L.. 

50c. pr. 100 
lbs. 

Babbit, B. T. 

Soap, common soap powder, 
and con. lve.C. L.. 

45c. pr. 100 
lbs. 

Benjamin, Geo. P... 

General merchandise_A. Q.. 

C. L. rates_ 

Blake Moffit & 

Flat paper and cardboard, 

75c. pr. 100 

Towne. 

A. Q. 

lbs. 

Bonestell Richard¬ 
son & Co. 

Book paper, N. S. C.A. Q.. 

60c. pr. 100 
lbs. 

Cluett, Peabody & 
Co. 

Collars, cuffs, and shirts. 

130c. pr. 100 
lbs. 

Dinkelspeil, L., & 
Sons. 

Dry goods. 

40$ yff rail.... 

Dolliver & Bro. 

General merchandise_A. Q.. 

C. L. rate. 

Dunham Carrigan 

] 


& H. Co. 

> “ “ ...A.Q.. 

C. L. rate. 

P. H. & S. Co. 


Eastman Kodak Co. 

Kodaks and photo supplies.... 

180c. pr. 100 
lbs. 

Elkus-Brenner Co., 

Dry goods. 

40$ off rail_ 

The. 

Goldstone Bros. 

* t 

40$ off rail.... 

Holbrook, Merrill 

Stamped ware, nested_A. Q.. 

C. L. rate. 

& S. Co. 


Ide, Geo. P. 

Collars, cuffs, and shirts. 

130c. pr. 100 
lbs. 

Lowenberg & Co_ 

Drygoods. 

40$ off rail_ 

Meyerstein Co., The. 

40$ off rail.... 

Roeblings, J. A., 

Wire, see Am. W. & Steel Co... 

Same as A. W. 

Sons’ Co. 


& S. Co. 

Sternheim, S., & Son. 

E ware, hotel china, com. 
tumblers and jelly glasses, 
A. Q. 

70c. pr. 100 
lbs. 

Do. 

Lamp goods, consisting of 
metal lamps, fix’s, and trim¬ 
mings. 

140c. pr. 100 | 
lbs. 

Do. 

Brass and bronze articles, 
other than lamp goods. 

150c. pr. 100 
lbs. 

Do. 

Terra cotta or plaster of Paris 
busts and orn. 

100c. pr. 100 
lbs. 

Williamson Broth- 

Candy, rel. to 5c. per lb. valua- 

80c. pr. 100 

ers. 

tion; 10 ton lots. 

lbs. 


From— 


New York. 


N.Y. and com¬ 
mon points. 


New York. 


N.Y. and com¬ 
mon points. 


New York. 


Remarks. 


Abs. 15c. 
100 lbs. 


pr. 


-o'gSg 

■2 tf'g a> 

Los; 

CP>H .S“o 

•ga^o 

ggf c 

x) 

o - r tK 5; s 
h rt 18 O 
£ g-g-Q P. 

st Q, O d ^ 

« ara*g 

Ss a § ^ 

0SO®« 
t-, O S P. 


Cancelled. 


Effective August 26th, 1903. R. L. Walker, traffic manager, 24 State St., New York. 















































INVESTIGATION OF PANAMA RAILWAY COMPANY. 


321 


CONTRACT BETWEEN THE REPUBLIC OF NEW GRANADA AND 
THE PANAMA RAILROAD COMPANY, MADE IN 1850. 

Contract in respect to the privilege of constructing a railroad from one ocean to the other 

by the Isthmus of Panama. 

The executive power, being authorized by the legislative decree of 12th June, 
1849, to amplify and amend the contract entered into in Washington on the 28th of 
December, 1848, for the construction of a railroad on the Isthmus of Panama, and it 
being advisable for this purpose to conclude and execute a new contract, in which 
the rights acquired and the obligations incurred by the Government of New Granada 
and the Panama Railroad Company may be clearly established, without need of 
reference to the contracts previously entered into on the subject, the citizen Presi¬ 
dent of the Republic of New Granada has thought proper to empower for this pur¬ 
pose Victoriano de Diego Paredes, secretary of state for foreign affairs of the said 
Republic, and the Panama Railroad Company, John Lloyd Stephens, vice-president 
of said company and its commissioner in New Granada' who, after mature confer¬ 
ence, have agreed upon the following contract: 


CHAPTER FIRST. 

Of the Rights, Privileges, Gifts, Franchises, and Exemptions Granted to the 

Company. 


Title first.— Grant of privileges. 

Article I. 

The Government of New Granada grants to the company styled the Panama Rail¬ 
road Company, its representatives or assigns, the exclusive right of building a rail¬ 
road between the two oceans across the Isthmus of Panama. 

Article II. 

The privilege of building a railroad granted to the company by the preceding 
article shall continue in force forty-nine years, to be computed from the day of the 
completion of the road and its being opened to public use. Nevertheless, said privi¬ 
lege shall terminate before the expiration of the said forty-nine years if before their 
expiration the Government shall have resumed the privilege by virtue of the right 
and power reserved by the following conditions: 

At the expiration of twenty years, counting from the day on which the railroad 
shall have been completed and opened to public use, the Government may resume 
the privilege for the benefit of New Granada, on paying the sum of five millions of 
dollars as the whole amount of indemnification. If the privilege be not resumed at 
that date, it shall continue in force ten years longer for the benefit of the company, 
at the end of which the Government may resume it on paying four millions of 
dollars. If the privilege be not resumed even at the expiration of the last-mentioned 
period, then it shall continue in force for ten years longer, at the expiration whereof 
the Government may resume the same on the payment of two millions of dollars. 
To entitle the Government to avail itself of the rights thus reserved to it of resuming 
the privilege granted, it must notify the company of its intention so to do at least 
one year before the day of the completion of either of the three periods above 
mentioned. 

Article III. 

The sum to be paid to the company on the resumption of the privileges in either 
of the three cases mentioned in the preceding article, shall be in specie, in American 
dollars, without deduction; it being well understood that in all other cases in which 
mention is made of dollars in this contract it is of American dollars, without deduc¬ 
tion. 


pan ry— 05-21 


322 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Article IV. , 

The company shall, after the resumption of the privilege, remain in possession of 
the lands granted to it gratuitously and perpetually by the eighteenth article of this 
contract. 

Article V. 

The railroad from ocean to ocean shall be completed within six years, to commence 
from the expiration of four months after the present act of concession shall have 
been approved by the Congress of the Republic, and the fact of its completion shall 
be proved before the governor of Panama at the request of the company, by a 
statement drawn up on each side, after discussion between it and the agent or agents 
of the executive power commissioned for that purpose. 

Article VI. 

While the exclusive privilege granted to the company, or persons engaged in the 
enterprise of building the railroad from one ocean to the other, continues in force, 
the Government of the Republic agrees, neither itself to build, nor grant to any 
other company whatever, under any title whatever, the right of building any other 
railroad on the Isthmus of Panama; and it is likewise stipulated that, while the said 
privilege continues in force the New Granadian Government shall have.no power to 
undertake, nor to permit any other person to undertake, without the concurrence 
and consent of said company, the opening of any maritime canal to unite the two 
oceans across the said Isthmus of Panama. 

• Article VII. 

During the whole term specified in the preceding article, and without interfering 
with the completion in due season of the railroad, the company shall have also the 
exclusive right of making across the Isthmus of Panama any sort of road for wheel 
carriages, either from ocean to ocean, or to any point on the river Chagres. Conse¬ 
quently, the New Granadian Government binds itself not to undertake, nor to permit 
any other company or individual to undertake, during the term specified in this 
article, the building of any other macadamized carriage road, plank road, or road of 
any other kind suitable for the use of wheel carriages, between the two oceans, 
across the Isthmus of Panama; it being, nevertheless, well understood that the privi¬ 
lege of which this article treats, can not and must not in any manner prevent the 
completion, preservation, and improvement of roads which already exist, or which 
are actually being constructed on the said Isthmus. 

Article VIII. 

The company shall have, moreover, the exclusive privilege of navigating the 
Chagres River by steam power, until the railroad is completed from one ocean to the 
other, on the terms specified in this contract, and in accordance with its provisions, 
the company in the meantime being bound to keep constantly on said river one or 
more steamboats employed in transportation; but the provision in this clause shall 
not prevent steamboats which may now be in said river from continuing to navigate 
the same. 

Article IX. 

Exclusive privilege is also granted to the company for forty-nine years: 

First. To use the ports situated at the two termini of the railroad]! required for the 
anchorage of vessels, and for the loading and unloading of goods which are to pass 
over the said road. 

Second. To use the landings necessary, and especially those designed for the 
storage and free deposit of all goods and merchandise admitted for transit across the 
Isthmus on the railroad built by the company. By virtue of said privilege the com¬ 
pany may collect as a compensation for the use of the line of communication, means 
of transportation, ports, landings, warehouses, and establishments of all kinds 
belonging to it, such tolls, storage, and carriage as the company may think proper to 
establish. 

Article X. 

The executive power shall determine the forms to be observed in the landing of 
goods on either ocean; and the intervention therein of the officers of the Republic to 
prevent the effects destined for transit from one ocean to the other from being left 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


323 


on the way or fraudulently introduced for internal consumption. Said precautions 
shall be such as may tend to prevent all frauds to the injury of the public revenue 
without delaying or embarrassing the rapid dispatch and transit of passengers and 
packages of merchandise, luggage, and goods of all kinds which may be subjects of 
lawful commerce. 


Article XI. 

During the progress of the railroad towards completion the company may open to 
public use such portion thereof as may be passable, and as may be judged proper to 
be put in use, as its partial completion progresses. The company may also then enter 
proportionally into the enjoyment of the grants, privileges, and advantages which 
form the subject of the present grant, in conformity with the provisions of the second 
chapter of this contract. 


Article XII. 

The completion of one-half of the railroad shall secure to the company the absolute 
possession of the entire privilege hereby granted and of all the rights appertaining to 
it, the company, however, remaining always bound to complete the road within six 
years, in pursuance of article fifth, or in eight years, in case the period of such com¬ 
pletion of the said road should be thus far extended, in default of which it shall 
incur the fines and penalties provided for in the aforementioned second chapter of 
this contract. 

Article XIII. 

The company may give to the railroad between the two oceans across the Isthmus 
of Panama such direction as it may judge most favorable for the enterprise, the points 
of departure and arrival which it may consider most advantageous and convenient 
for the entrance and anchorage of vessels, or for ports properly so called, and for 
wharves, dry docks, places for lighterage, landings, warehouses, stations, hotels, and 
establishments of all kinds being at its free option, it being, nevertheless, stipulated 
that the provisions of this article shall be understood without prejudice to what is 
hereinafter provided in article fifty-second of this contract. 

Article XIV. 

The company is also at liberty to select the mode which it may consider most 
favorable for the construction and working of the railroad, provided it be completed 
in such a manner that travelers and goods passing over it may be transported in 
twelve hours at the farthest from one ocean to the other, and vice versa. 

Title II .—Grants of lands. 

Article XV. 

In consideration of the difficulties of the enterprise, and of the direct and indirect 
advantages which the Republic must derive from it, various grants of lands are made 
to the company, on the continental part of the Isthmus, comprised within the limits 
which bounded the provinces of Panama and Veraguas, on the first day of January, 
one thousand eight hundred and forty-nine. The Government of the Republic grants, 
therefore, gratuitously to the company, on the terms mentioned in this article: 

First. The lands which may be necessary for the building of the line of the rail¬ 
road through its whole extent. 

Second. All the lands which it may require for the establishment of seaports, dry 
docks, river ports, landings, wharves, places for lighterage, warehouses, stations, 
hotels, and in general for all purposes necessary in the construction and working of 
the railroad. 

Article XVI. 

Although, according to what is expressed in the preceding article, the company 
has no right to vacant lands on the islands adjacent to the Isthmus of Panama, the 
Government of the Republic, nevertheless, binds itself to grant to the company all 
the vacant lands on the island of Manzanillo, in the Bay of Limon, whenever the 
company considers it proper to extend the work of the railroad to said island, so 
that one of its extremities terminates thereon. 


324 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


Article XVII. 

The grant of vacant lands, mentioned in the two preceding articles, is to be under¬ 
stood as referring to lands belonging to the Republic. With regard to those which 
are the property of individuals, the company must obtain them from their owners, 
after valuation and proper indemnification, in the manner specified in article twenty- 
first. > 

The lands granted by the Government of the Republic, as specified in the two pre¬ 
ceding articles, shall revert to its possession and jurisdiction immediately on the 
expiration of this privilege; and shall be restored to it by the company on the dates 
fixed for that purpose, in the prescribed form and agreeably to the conditions speci¬ 
fied in the second chapter of this contract, wherein the duties and obligations assumed 
by the company are set forth. 

Article XVIII. 

A grant is, moreover, made to the company, gratuitously and in perpetuity, of one 
hundred thousand fanegadas of vacant land, in the provinces of Panama and Vera- 
guas, within the limits set forth in the first part of the fifteenth article, which may 
be increased to one hundred and fifty thousand, if such extent be found at the dis¬ 
posal of the Government in the two provinces above mentioned, so that the Govern¬ 
ment can pronounce them vacant; and the company shall have liberty to select them, 
in the continental portion of said provinces, where it may judge most proper. It being 
stipulated, that in those which may be selected on the line of the road or in its 
vicinity, intervals shall be positively left, of equal extent to those which the company 
reserves to itself, so that the Government of the Republic may make grants or sales 
of land for other establishments, which may be made on said line or in the vicinity 
of the road. 

The one hundred thousand fanegadas of land, or such number thereof, up to the 
number of one hundred and fifty thousand fanegadas, which may be at the disposal 
of the Government as vacant, and granted to the company, may be used to make 
therein encampments for workmen, fields for cultivation, pastures for beasts of bur¬ 
den and cattle, places for cutting wood, for building or for fuel; and in general for 
establishments, suitable for facilitating any industrial operations undertaken by the 
company, especially those relating to colonization. 

If, which is not to be expected, there should not be within the limits of the pro¬ 
vinces of Panama and Veraguas, mentioned in the preceding fifteenth article, the 
vacant lands necessary to secure to the company the one hundred thousand fane¬ 
gadas specified in this article, those which may be wanted to complete the one 
hundred thousand fanegadas, will be granted at the points which the said company 
may designate in the continental part of the provinces of Carthagena, Santamarta, 
Riohacha, and Choco; this grant and the others mentioned in the present article 
being understood in reference to the vacant lands which belong to the State and to 
no others. 

The Government of the Republic will make no grants of vacant lands within the 
limits aforementioned of the provinces of Panama and Veraguas until after those 
mentioned in this article have been delivered into the possession of the company; 
saving, nevertheless, the right which any other person may have acquired by virtue 
of grants of the Granadian Government "anterior to the date of the present contract. 

Article XIX. 

The vacant lands granted to the company by the eighteenth article of this contract 
are given to it in full ownership, and the company may freely dispose of them dur¬ 
ing the continuance of the privilege granted and after the termination of said period 
or the resumption of the said privilege. 

Article XX. 

The lands mentioned in the preceding article and the lands appropriated for the 
railroad shall be delivered to the company as they may be requested, and agreeably 
to the provisions of the fifteenth, sixteenth, seventeenth, and eighteenth articles of 
this contract. 

Article XXI. 

When the lands required for building the railroad for ports or any other appurte¬ 
nances of the works of said road are the property of individuals, the company shall 
have the right to take them, by order of the governors of the respective provinces, 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 325 


after valuation made and just indemnification given to the owner, in conformity 
with the provisions of the law of June 2d, 1848, defining the cases in which property 
may be taken for public use, and the forms to be observed in such cases. 

Article XXII. 

The delivery to the company of the vacant lands granted gratuitously to it shall 
be effected provisionally so soon as they may be designated by the company after 
proof of their character as vacant lands, a survey and an appropriation to it by the 
governor of the respective provinces. This provisional appropriation shall be sub¬ 
mitted to the examination and approval of the executive power. So long as it shall 
not be continued it shall only produce the effect of preventing any subsequent grants 
of the lands in favor of a third person, but from the time that it has been examined 
and approved, in conformity with this article, it shall be equivalent to taking formal 
possession thereof. 

Article XXIII. 

The company being at liberty to vary or modify the line of the railroad if diffi¬ 
culties or obstacles should be found in carrying it out on the line first selected, may, 
in such case, change also on the portion so varied the location which it may have 
previously made of the vacant lands, which it can obtain gratuitously, according to 
the stipulations of the fifteenth article. 

Title III. — Rights, franchises, and exemptions. 

Article XXIV. 

The Republic, in order to aid as far as possible, on its part, the enterprise of the 
company and to facilitate the success of its operations of all kinds, confers upon the 
company the rights, franchises, and exemptions mentioned in the articles following: 

Article XXV. 

The enterprise is deemed of public utility. 

Article XXVI. 

The company is authorized to propose to the executive power such regulations as 
it may judge proper for the police, security, use, and preservation of its ways of com¬ 
munication, ports, works, and establishments of all kinds; but such regulations shall 
not take effect without the express approval of the executive power, which even 
after having approved may annul or amend them if it think proper, proceeding 
always in conformity with the laws of the Republic. 

Article XXVII. 

The rates of transportation or freight of money, carriage of merchandise or trav¬ 
ellers over the railroad, of port dues, board, and storage in its depots and establish- 
lishments shall be fixed by the company, and modified as it may judge proper, 
making them immediately known to the local authorities in order that the public 
may be informed of them. 

Article XXVIII. 

All correspondence which may arrive from the territory of the Republic or from 
foreign countries to be transported over the railroad, whatever may be its destina¬ 
tion, must absolutely pass through the post-offices of New Granada, which shall open 
with the company an annual account current of postage in order to compute the 
share of profits belonging to New Granada, in conformity with the provisions of the 
thirtieth article of this contract and in order to guard against fraud in this respect. 

Article XXIX. 

To carry out the stipulation in the preceding article the company binds itself not 
to receive any other packages of correspondence than those delivered to it by the 
post-offices of. New Granada, to be carried by the railroad to their port of embarka¬ 
tion or to the point on the Isthmus for which they may be destined on the line of 


326 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


the said road, complying with the regulations which the executive power may lay 
down on the subject, and also with those which may be given for the carrying on 
said road of the correspondence of foreign nations which may be delivered to the 
company by the officers of the Republic for that purpose. 

Article XXX. 

The executive power shall at all times determine what foreign nations may be per¬ 
mitted to transport their correspondence across the Isthmus of Panama by the rail¬ 
road, but in all cases in which the mails of foreign nations shall be permitted to pass 
by the Isthmus of Panama all contracts and pecuniary agreements for their trans¬ 
portation by the said railroad shall be made by the company, and all the pecuniary 
proceeds of such contracts and agreements shall go into the funds of the company as 
a branch of its profits. In compensation for this privilege the company undertakes 
to transport by the railroad, free of charge, all the mails of New Granada; and, more¬ 
over, to pay to the government of the Republic five per cent on all sums of money 
which it may receive in virtue of said contracts and agreements, whether such sums 
proceed from contracts which the company may enter into with foreign governments 
or with other companies, or from the general regulations which it may establish for 
the carrying of the correspondence of nations which may not have entered into 
special contracts with it. 

And it is also stipulated: First. That whatever may be the profit which the com¬ 
pany may receive by virtue of such contracts and agreements, in no case shall it on 
this account pay to the Government of New Granada less than ten thousand dollars 
per annum; second, that this payment shall be over and above the three per cent of 
the net profits of the enterprise to which New Granada is entitled; and third, that 
the power of the company to enter into such contracts or pecuniary agreements shall 
not be opposed in any manner to the contracts or agreements which now exist 
between the Republic of New Granada and any foreign nation or nations, for the 
transportation of mails on the Isthmus of Panama. 

Article XXXI. 

The services of all kinds which the company is to perform on the railroad, during 
the continuance of its privilege, shall be performed exclusively by its agents, and 
with the materials belonging to it, unless it should choose to perform them in 
another way. 

Article XXXII. 

The company may freely introduce into the Isthmus, without paying duties or 
taxes of any kind, ail the implements, machines, iron tools, material, and manufac¬ 
tured articles intended for the construction, working and preservation of the rail¬ 
road, and also the articles required for the subsistence and clothing of the workmen 
employed in the work, during the w hole period of the construction of the road, 
being subject in this respect to the regulations w hich the executive may establish. 

Article XXXIII. 

No taxes or contributions, national, provincial, municipal, nor of anv other kind, 
shall be imposed upon the railroad or upon its warehouses, furniture, machines or 
other works, property and effects of any kind belonging to it, and which in the 
judgment of the executive power are necessary for the service of the said railroad or 
its dependencies; and in compensation it is expressly stipulated that, in every case 
and notwithstanding any provisions of this contract to the contrary, the troops, 
warlike stores, arms, clothing, and other effects of the Government of the Republic, 
and persons coming to it as new settlers on account of the State, shall be transported 
gratuitously over the railroad at the charge and cost of the company, and w ithout 
the Government or such troops or colonists having to pay anything for freight or for 
any other cause. 

Article XXXIV. 

Passengers, money, merchandise, goods, and effects of all kinds w hich may be 
transported across the Isthmus, to go from one ocean to the other by the railroad, 
shall be exempt from taxes and imposts, national, provincial, municipal, or of any 
other description. The same exemption is extended to all effects and merchandise 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


327 


which may remain on deposit in the ports, stores, and landings of the company, 
destined either for the interior or for other countries; but the merchandise or effects, 
destined for consumption in the interior of the Republic, shall pay the duties and 
imposts established, or which niay be established, when such goods leave the ware¬ 
houses of the company; to which end their delivery shall be conducted under the 
cognizance of the officers of the Republic, and in conformity with the laws and reg¬ 
ulations laid down by the executive. 

Article XXXV. 

Foreigners who may form settlements on the vacant lands granted gratuitously to 
the company shall be exempt during the space of twenty years from the date of the 
forniation of such settlements from all forced contributions, and from tithes and first 
fruits on their agricultural property and their products for home consumption; they 
shall be entitled to receive letters of naturalization, as soon as they solicit them, on 
fixing their residence in the territory of the Republic; and during the said term of 
twenty years from the formation of their settlements, they shall not be obliged to 
serve in the Army, Navy, or national guard, nor to take arms in defence of the 
Republic, save in case of foreign invasion. 

Article XXXVI. 

Travellers passing from one sea to the other over the railroad shall not require any 
passport to pass over it, except in cases of foreign war or internal political commo¬ 
tion, when the Government may deem the presentation of passports expedient for 
the security of the country or the preservation of public order. Nevertheless per¬ 
sons who have been expelled from the territory of the Republic, or other individuals 
whom the laws may have forbidden to enter it, shall not pass over the Isthmus. 


CHAPTER SECOND. 

Of the Duties and Obligations Assumed by the Company. 

Article XXXVII. 

The company undertakes to execute, at its own expense, risk, and peril, all the 
works necessary for the establishment and construction of a railroad, to open and keep 
up a line of communication between the two oceans across the Isthmus of Panama. 

Article XXXVIII. 

The said works shall, unless in case of superior force, be commenced within the 
period of eighteen months, which shall begin to run four months after the approval 
of this contract by the Congress of the Republic. Works of a definite nature, in 
respect to the laying out the line, indispensable to its execution, shall be regarded 
as the beginning of the enterprise. 

Article XXXIX. 

The said works shall be completed within the term of six years, counting from the 
expiration of four months after the approval of this contract by Congress, so that the 
railroad undertaken by the company shall be passable in all its parts at the expira¬ 
tion of the term so specified; but if after constructing and making passable one-third 
part of the railroad the company should find that it cannot finish it in its whole 
extent in the six years agreed upon in this article, it shall have the right to ask an 
extension of the term, which shall be granted by the executive for two years, in addi¬ 
tion to the six years fixed for the completion of the whole railroad, without incurring 
thereby any of the penalties contained in this second chapter of this contract. 


Article XL. 

The company shall secure the fulfillment of the obligations assumed by it for the 
execution of the works of the enterprise, N which is the subject of this contract, in the 
sum of one hundred and twenty thousand dollars; but it shall not be necessary for 
the company to deposit this sum in cash, but only to secure it by means of an instru¬ 
ment of double the amount, executed with all proper solemnities and to the entire 
satisfaction of the Government of the Republic, to answer, by virtue of such security 


328 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


for the said sum of one hundred and twenty thousand dollars in case the railroad 
should not be completed within the time stipulated in this contract and in accord¬ 
ance with the provisions herein agreed upon. 

Article XLI. 

In case the privilege should become void in consequence of failure to begin the 
work, or from its not being completed in the manner and within the period prescribed 
therefor, the company shall forfeit in favor of the Republic the sum of one hundred 
and twenty thousand dollars mentioned in the preceding article. 

Article XLII. 

If the company should not have made its preparations for beginning its works 
agreeably to the thirty-eighth article, and if it should not have actually begun the 
same twenty-two months after this contract has been approved by Congress, it shall 
forfeit all the privileges and advantages which result to it therefrom; unless the agents 
of the Government of the Republic should not have affected the delivery of the 
lands necessary for the road within three months after they have been demanded by 
the company. In this case the term allowed by the thirty-eighth article for the 
commencement of the work shall be extended for a period equal to that of the delay 
it has sustained in the delivery of the lands after the three months from the time of 
their being demanded. 

On no account and at no time shall the work of the railroad be suspended by 
reason of differences which may arise between the company and the owners of land 
as to the value which must be put upon such as it may be necessary to purchase for 
the building of the said road; but in order to give positive guaranties to such owners, 
and that their rights may not in any manner be prejudiced, the company shall exe¬ 
cute a personal undertaking or mortgage, sufficient, in the judgment of the governor 
of Panama, to answer for the price which may be fixed for said lands, according to 
the law of the second of June, one thousand eight hundred and forty-eight, “of 
expropriation. ’ ’ 

Article XLIII. 

If at the end of the six years fixed for the completion of the railroad the company 
should not have completed half of the work it shall incur the penalty of the avoid¬ 
ance of the privilege and forfeit the sum of one hundred and twenty thousand dol¬ 
lars, secured by the obligation in double the amount which it is to execute as a 
guarantee of the fulfillment of the conditions which it assumes. The company shall 
incur the same penalties if at the end of the eight years the works of the railroad 
shall not be completed, and the said road passable throughout, in the manner and 
form and according to the conditions set forth in this contract. 

Article XLIV. 

In case of forfeiture legally declared against the company it shall be bound to return 
to the Government the lands granted gratuitously to it and in the same conditions 
in which they may be when the forfeiture is pronounced without any obligation on 
the part of the New Granadian Government to make to the said company, or to its 
assigns, any indemnification for improvements or for any other cause. 

Article XLV. 

After the entire completion of the work of the line of the railroad the company 
shall order a survey of the lands to be made at its own expense, with notice to the 
owners of the lands adjoining, together with a statistical plan of all the parts of the 
road which are to be returned with it to the Republic at the time of the expiration 
of the privilege. It shall also order a descriptive statement to be made, at its own 
expense, of the bridges, aqueducts, and other works of art which may have been 
constructed and which are to be returned to the Republic at the same time. 

Article XLY1. 

The company shall make also, at its own expense, similar descriptive statements; 
of all the subsequent works of the same kind which it may afterwards construct 
during the period of its possession of the privilege. 


INVESTIGATION OF PANAMA RAILWAY COMPANY. 


329 


Article XLVII. 

An exact and authenticated duplicate of the statistical plan and descriptive state¬ 
ments above mentioned, shall be delivered by the company to the governor of 
Panama, or sent to the office of the secretary for foreign affairs, to be deposited in the 
national archives for use there, in case of need, during the continuance of the privil¬ 
ege, or at the time of its expiration. 

Article XLVIII. 

One year before the expiration of the privilege the company shall be bound to 
make, on notice to and after hearing the agents of the Republic commissioned for the 
purpose, valuations, statements, and inventories of the immovable property, bridges, 
aqueducts, and other works of art which are to be returned to the Republic, agree¬ 
ably to the descriptive statements and statistical plan, of which the duplicates shall 
have been deposited in the archives of the administration of New Granada. 

Article XLIX. 

At the expiration of the term of the privilege, and by the mere fact of its expira¬ 
tion, or in case of the resumption of the privilege, as provided in the second article 
of this contract, and by the mere fact of the resumption, the Government of New 
Granada shall be substituted in all the rights of the company, in the ownership of 
the lands and of the works of art, designated in the statistical plan and in the 
inventories and descriptive statements above mentioned, and shall enter immediately 
into the enjoyment of the line of communication, of all its appurtenances and de¬ 
pendencies, and of all profits accruing therefrom. The company shall be bound to 
deliver to the Government in good condition, the roads, the works which compose 
them, and their appurtenances, such as the places for lighterage, for discharging 
cargo, guardhouses for the inspectors, offices for the collection of freight and carriage, 
machines, fixed or movable, and, in general, all objects movable and immovable, 
whether destined specially for the service of transportation or applicable to any 
other object connected with the enterprise, and whether included or omitted in the 
said plans, inventories, statements, and statistical tables. 

Article L. 

In conformity with what is already specified it is hereby expressly stipulated 
that when, at any time or for any cause whatever, the privilege of the company 
shall terminate or expire, the Government of the Republic shall enter immediately 
and gratuitously into the enjoyment, ownership, and possession of all the objects 
which form the subject of articles forty-eight and forty-nine preceding the present; 
and consequently the said Government shall enter likewise immediately and gratui¬ 
tously into the enjoyment, ownership, and possession of the railroad in its whole 
extent, from one ocean to the other, and of the places for lighterage, wagon roads, 
lateral and cross, places for loading and unloading, storehouses, stations, guard¬ 
houses for the police, offices for the collection of freight and carriage, machines, fixed 
or movable, and, in general, of all the works, effects, utensils, and things of every 
kind which, in the judgment of the executive power, may be necessary for the use 
of the road and its dependencies, such as locomotives, cars and carriages of every 
description, materials and furniture of every kind, and, in fine, any other things, 
movable and immovable, which may be applicable to the service of the railroad and 
of the other roads, works, and establishments dependent upon it, or in any manner 
connected with the enterprise, or belonging to it, although not expressly mentioned 
in this article, nor in those preceding; it being well undertsood that all these things, 
movable and immovable, shall pass, as it has been mentioned, into the enjoyment, 
ownership, and possession of the Government of the Republic without its being 
obliged to pay anything to the company by way of indemnification, or for any other 
cause. 

Article LI. 

In consideration of the collection and receipt of the duties and rates of transportation 
fixed by it, the company binds itself always to effect with care, punctuality and celerity, 
and without exception as to national character, the transportation of travellers, cattle, 
merchandise, goods, and materials of all kinds which may be confided to it, all of which 
shall be transported without any deduction from the established prices, except such 
as it may allow in favor of nations which are now bound, or which may hereafter 


330 INVESTIGATION OF PANAMA RAILWAY COMPANY. 


become bound, by means of public treaties entered into with New Granada, to guar¬ 
anty positively and effectually to this Republic its rights of sovereignity and owner¬ 
ship over the territory of the Isthmus of Panama, and the perfect neutrality of said 
Isthmus, to the end that the free transit from one sea to the other may never be inter¬ 
rupted or embarrassed; but notice is expressly given, and in fact it is hereby especially 
stipulated, that New Granada, Granadians, and their property shall enjoy all the 
benefits and advantages which any other nation whatever may obtain by virtue of 
the provision in this article. 

Article LI I. 

Whatever may be the line selected by the company for building the railroad be¬ 
tween the two oceans, one of its extremities shall be the city of Panama. 

Article LIII. 

Vessels of nations at war with New Granada shall not be admitted into the ports 
at either extremity of the railroad, nor shall the productions, effects, and property of 
such nations have free transit across the Isthmus on said road. 

Article LIY. 

The expenses of surveying and laying off the lands granted to the company, the cost 
of the statistical plan, inventories, and descriptive statements mentioned in this con¬ 
tract, as well as the expenses and cost of the titles of ownership to be given by the 
authorities or notaries of the Republic, shall be borne by the said company; but all 
documents, of whatever nature, drawn up in the execution of this contract, shall be 
registered without cost. 

Article LV. 

The company binds itself to pay annually to the Government of New Granada three 
per cent of the net profits of the enterprise, in the same proportion in which they are 
to be distributed in form of dividends to the shareholders, without taking into ac¬ 
count in the payment of the said three per cent any deduction for the supposed interest 
of the capital of the company, or for any sum which the shareholders may designate 
as a reserve or sinking fund. It is stipulated that for the receipt of this duty the 
Government of New Granada shall look, with the shareholders of the enterprise, to 
the accounts produced and liquidated at the general meeting of the company, which 
accounts the agent of the Republic may examine, and in respect to them he may 
make observations in the same manner as any shareholder, but without power of 
interfering in the general management of the company. Besides what is stipulated 
in this article, it is also agreed that the payment of the said duty of three per cent 
shall be made at Bogota, Panama, or New York, as the Government of the Republic 
may direct. 

Article LVI. 

The company selects New York as its domicile, and will maintain in Panama a 
representative with power sufficient to act in its name in all cases where it may be 
necessary. 

Article LVII. 

The present privilege can not be granted or assigned to any foreign government— 
that is, to any government out of the New Granadian territory—under penalty of for¬ 
feiture of the privilege, by the mere fact of attempting or carrying into effect such 
grant or assignment; and, although it should at any time be attempted or carried into 
effect, it will be, and from this time is, declared absolutely null, and of no force or 
effect. 


Article LYIII. 

Wherever in this contract mention is made of the completion, expiration, or termi¬ 
nation of the privilege granted by it, all that is said in reference to such completion, 
expiration, or termination shall be understood as said and applicable also to the case 
of the resumption of the said privilege. Consequently, it is expressly stipulated, thgt 
at any time when the said privilege may be resumed, according to the second article 
of this contract, the Panama Railroad Company shall fulfil all the duties incumbent 
upon it, in the same terms as if the forty-nine years, which the privilege at the 


INVESTIGATION OE PANAMA KAIL WAV COMPANY. 


331 


utmost, may extend, had expired; and it is also expressly stipulated that for the sum 
which may be paid as indemnification to the Panama Railroad Company, in any of 
the three cases set forth in the article last mentioned, the Government of New 
Granada shall acquire not only the rights, but also all the material objects, which the 
company is bound to deliver to it on the expiration of the privilege, which delivery 
shall be made as may be established by general regulation, on the same terms on 
which it should take place, if the forty-nine years which the privilege at the utmost 
may continue had expired. 

Article LIX. 

Controversies which may arise between! the executive power of New Granada and 
the Panama Railroad Company, in regard to the fulfilment or failure in fulfilment 
of this contract, or upon the understanding or construction of the clauses it contains, 
shall be determined by the magistrates and according to the laws of the Republic of 
New Granada. In no case shall any privilege, immunity, or exemption be alleged 
which is not expressly recognized or granted in this contract ; nor will the interven¬ 
tion of any authority or functionary other than those legally established with juris¬ 
diction in the Republic be allowed. Such controversies as may affect the existence, 
preservation, or permanency of the privilege and of the rights thereunto appertain¬ 
ing shall be decided by arbitration. 


Article LX. 

The Government of the Republic binds itself to protect and maintain, fully and 
entirely, the rights of the company under this contract; and to this end it agrees, 
that where doubts occur in the construction of any clause or clauses inserted in the 
preceding articles, which secure to the company any inducements or advantages, 
if such doubts should occur in consequence of such clauses not being sufficiently 
explicit, they shall be interpreted in the natural signification most favorable to 
the company. 

Article LXI. 

All the legislative acts, decrees, and agreements by which, in former years, various 
privileges were granted for the opening of an intermarine communication by the 
Isthmus of Panama are irrevocably annulled. Consequently, the “Panama Rail¬ 
road Company ” has the sole right and duty of constructing a railroad from one ocean 
to the other by the said Isthmus, in conformity with the stipulations of this contract, 
which is the only one remaining in force on the subject between the Government of 
the Republic and said company; since by this clause not only all the acts, decrees, 
and agreements above mentioned, but especially all the contracts and stipulations, 
which formerly existed between the said Government and the said company, or the 
individuals, of whose rights it is the assignee, are annulled. 

Article LXIL 

This contract, as divided into two chapters and extending to sixty-two articles, 
shall be submitted for approval to the executive power of the Republic, and that 
being obtained, shall be presented by it to Congress; the consent and approval of 
which are required, in order that, receiving the force of a law, it may be carried into 
effect . a 

The railroad enterprise, being of public utility, the authorities shall afford it all 
possible protection in conformity w T ith the laws. 


rTranslation of Article V, of Law No. 33 of 1890, as published in the ‘-Gaceta de Panama” No. 416 of 
L Dec. 10th, 1890,] 

Article Y. 

From the month of January, 1891, the Department of Panama will continue to 
receive directly from the Panama Railroad Company the sum of twenty-five thou¬ 
sand dollars ($25,000) in American gold, assigned to it by law 46 of 1867, by which a 
contract was approved. The Government will give opportune notice to the Panama 
Railroad Company in order that the dispositions made by this article may be carried 
out on the date expressed in same. 


a Note.— Congress approved June 4, 1850. 










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